US Heating Oil Supplies at Highest Levels in 27 Years
Supplies of distillates in the US have reached their highest level in 27 years. (image: hourlyjuice.com)
Since the beginning of last heating season, huge supplies and low demand have been the norm on the heating oil market. These fundamental forces should have brought extremely low heating oil prices on the New York Mercantile Exchange for the last year or so, even during the winter. But other factors like the strength of the US dollar and ups and down on American stock markets brought on the same unpredictable swings in heating oil prices that might be expected under a different supply and demand picture.
This week, however, supply and demand have come roaring back to the heating oil markets. According to Bloomberg News, Wednesday’s Energy Information Administration petroleum inventory report tallied distillate inventories, a category that includes heating oil and diesel fuel, at 173.1 million barrels, 3.46 million barrels higher than the previous week’s total and the highest supply level since January of 1983.
The biggest supplies of heating oil in 27 years, combined with stock market losses and high unemployment that point to continuing low demand have driven the price of heating oil down by 15 cents a gallon in the last three days, and falling. As one analyst put it, the market is (at least for now) coming to its senses:
“The weekly jobless numbers were disastrous and sent the market lower,” said Phil Flynn, vice president of research at PFGBest in Chicago. “The oil market is facing the reality, which is that supplies exceed demand. The only thing that was supporting prices was a false sense of economic security.”
Tumbling oil prices are always good news for heating oil users, and big supplies and small demand will likely stick around until at least this fall, when cold weather begins to drive demand and prices up. But as any oil price-watcher has learned, sanity in the market rarely lasts long, which means heating oil is just one big stock market day or Middle Eastern diplomatic crisis away from a 15-cent-per-gallon increase. For now, let’s all sit back and bask in the market’s soothing rationality and the cozy lower prices that it brings.
Suspected Times Square Bomber’s Debts Included Unpaid Heating Oil Bills
The suspected bomber, Faisal Shahzad, in custody. (image: gothamist.com)
As more details emerge about the attempted car bombing in Times Square emerge, one fact (among others) about the suspected bomber, Faisal Shahzad, has come into focus: he was behind on his heating oil bills.
A look into Shahzad’s finances by CBS News found that his heating oil company in Connecticut, Hoffman Energy, filed a claim against him in 2009 for failing to pay for his oil. Records show that he owes Hoffman almost $800 in delinquent payments. Shahzad’s financial affairs are relevant to the bombing investigation because they could lead authorities to terrorist groups he may be affiliated with.
An employee at Hoffman Energy reached for comment on the case confirmed that Shahzad was a former customer, but declined to give further details. HeatingOil.com will update this post with new details as they become available.
New Head of National Oil Company, Kidnappings Shake Up Nigeria
Nigeria’s acting president has been taking steps to secure his political power in the unstable oil-producing nation. (image: news.bbc.co.uk)
As Africa’s biggest oil exporter, Nigeria is an important contributor to world crude oil supplies. But rebel groups in the oil-rich Niger Delta have been threatening the oil industry with kidnappings and attacks on infrastructure, stepping up their activities after the breakdown of a shaky cease-fire agreement earlier this year. Adding to Nigeria’s instability is the uncertain state of the presidency—President Umaru Yar’Adua has been in Saudi Arabia for the past three months, where he is reportedly receiving medical treatment for a heart condition.
In his absence, acting president Goodluck Jonathan has taken control of the government and appears poised to assume complete control of the office. Last week, Jonathan began consolidating presidential power by appointing a new cabinet and installing a new head of the Nigerian national oil company (NNPC), the BBC reported on Wednesday. Jonathan re-installed Shehu Ladan as head of the NNPC, who was removed from the same post by President Yar’Adua less than a year ago. As explained by the BBC, the appointment is being considered a largely political move: “The BBC’s Caroline Duffield in Abuja says the move will be seen as evidence of Mr Jonathan’s determination to remould Nigeria’s political landscape.”
As such, the appointment of Ladan is not expected to have an immediate effect on Nigeria’s oil operations or output levels. The fact that Ladan is the previous head of the NNPC and therefore an oil industry insider has lowered expectations of his bringing change to a company rife with corruption and inefficiency.
Just two days after Ladan’s appointment came an on-cue reminder that rebel groups remain a powerful force in Nigeria’s oil industry: 10 gunmen kidnapped four foreign oil workers from a construction site in the oil-rich delta region and escaped after a shootout with police, AFP reported on Friday. The incident followed another kidnapping on March 31, when rebels abducted a worker for the French oil firm Total in the city of Port Harcourt.
While the recent shakeup at the top of the NNPC and kidnappings of foreign oil workers have not had a direct effect on short-term oil prices, they could hold long-term significance as symbols of an increasingly tumultuous political situation in Nigeria. More controversial political moves and more destructive rebel attacks on the oil infrastructure could bring about oil price spikes as investors lose confidence in the government’s ability to maintain steady oil production and anticipate significant supply drop-offs.
Heating oil users should keep an eye on Nigeria, because even though it may seem far-fetched, living in a global economy with a worldwide market for oil means events on the other side of the globe can affect how much you pay to heat your home and drive your car.
Car Bombs Rattle Attempt to Renew Amnesty Process in Nigeria, Threats to Oil Production Intensify
Rebels attacked government meetings in the southern Nigerian city of Warri. (image: cnn.com)
Last September, an amnesty program initiated by the government of Nigeria had convinced thousands of militants to lay down their arms and succeeded in bringing some calm to the crucial oil-producing region of the Niger Delta. In October, the fragile peace in the Niger Delta had helped increase Nigeria’s oil production and exports. By December, the peace in the Niger Delta had begun to unravel. President Umaru Yar’Adua had left the country for medical treatment, and the amnesty program stalled.
On Monday, talks aimed at re-starting the amnesty process were interrupted by two car bombs, Reuters reported. The car bombs exploded near a government building in the southern Nigerian city of Warri and injured some six passersby, but no serious injuries or deaths were reported. The main rebel group operating in the Niger Delta, MEND, claimed responsibility for the attacks. The group said the bombings were in response to comments from a provincial politician that labeled MEND “a media creation.” The group also expressed frustration at the exclusion of community representatives from the amnesty process under President Yar’Adua’s acting replacement, Goodluck Jonathan. The MEND statement made clear its intention to step up attacks on oil infrastructure in the Niger Delta and included a specific threat against installations operated by French corporation Total, which has not previously been targeted.
Another Oil Pipeline Attack Threatens Cease Fire in Nigeria
Attacks on pipelines by armed militants have frequently disrupted Nigeria’s oil production. (image: javno.com)
With the Nigerian president receiving medical treatment in Saudi Arabia, and the US increasing security checks on the nation, Nigeria was dealt another blow Friday by the latest attack on a crude oil pipeline by Nigerian militants. According to the Wall Street Journal, unknown gunmen attacked a pipeline operated by US oil giant Chevron, forcing the company to cut production by 20,000 barrels a day.
The pipeline sabotage is the second of its kind in the last several months, with the Movement for the Emancipation of the Niger Delta (MEND) taking responsibility for a similar attack in late December. Two days later Shell, a target of the attack, looked to unload its Nigerian assets. Among other political reasons, Shell appears to be tired of the unyielding conflict in the area.
This latest attack could threaten a very shaky amnesty deal established by the government back in October, when thousands of militants turned over their weapons and called a truce. As Nigeria grapples with these issues far from the United States, they are likely to directly affect heating oil and other energy consumers. Attacks like the one on Friday decrease the world’s oil supply, wreak havoc on the industry, and generally end up raising prices here at home.
Russia’s Fight with Belarus Threatens European Oil Supplies
This oil depot in Belarus is along the Druzhba pipeline that carries Russian oil to Europe. (image: nytimes.com)
Tensions are high between Russia and the former Soviet republic of Belarus, the Wall Street Journal reported Tuesday, with Belarus threatening to cut off electricity to Russia’s westernmost region.
Belarus raised the stakes in an energy dispute that threatens midwinter disruptions for a pipeline system that supplies about 10 percent of the EU’s oil. Russia recently throttled back on supplies through the Druzhba pipeline, the main route for Siberian oil, after a pricing deal expired on December 31. The core of the dispute rests on Russia’s imposition of a new tax structure on the oil that Belarus siphons from the Druzhba line for refining. The demands could cost Belarus an estimated $5 billion this year, more than 10 percent of its GDP.
Iraq Threatens OPEC’s Power Over Oil Prices
Iraq’s production capacity is enough to create conflict within OPEC and even destabilize the Middle East. (image: z.about.com)
Iraq is threatening to throw a serious wrench into OPEC’s plans, reports Business Insider. OPEC members have said they are content with oil prices in the range of $70–80 per barrel and maintained their production targets at their recent annual meeting. But Iraq might not adhere to OPEC’s production quotas. The cash-poor country recently auctioned off some of its largest oil fields, with Russian and Chinese companies winning the most lucrative contracts. According to analysts, the auction could boost Iraqi oil production from 2.5 million barrels per day to as much as 12 million by 2016, which would quadruple its capacity and make it a rival to Saudi Arabia, the world’s biggest oil producer.
Such a drastic increase in oil production could threaten to undermine OPEC’s influence on oil prices, which currently stand at an amount that the Saudi Arabian oil minister, Ali al-Naimi, believes keep producers and consumers happy. If OPEC does not cut production to compensate for Iraq, the price of oil could drop significantly. OPEC will pressure Baghdad to adhere to their targets, but if Iraq flouts those targets there is little OPEC can do.
Rising Oil Output Protects Against Crude Price Spikes
A steady flow of crude is a buffer against sudden changes to demand or access. (image: upstreamonline.com)
Last week, militants threatened oil supplies in Iraq and Nigeria, two of the world’s most beleaguered crude producers. Typically, the prospect of conflict in either country, no matter how fleeting, would be enough to trouble the market and create a sizeable spike in global oil prices. This time around, however, crude prices rose only 70 cents, to end the week at a modest $73.36 a barrel, a sign that the oil sector’s growing capacity to shrug off sudden losses in production will, at least for the moment, keep crude prices stable.
According to an article published on Sunday by the Wall Street Journal, several major oil producers have improved production capacity in recent months, ensuring a steady supply of crude despite the occasional disruption. Earlier this year, Saudi Arabia said it increased its production capacity to a record 12.5 million barrels a day, while Qatar will soon ramp up the capacity of its offshore Al Shaheen oil field to 500,000 barrels a day (about three times the current capacity of Iraq).
Final Analysis on Copenhagen: Few Clear Gains, but Some Hope for the Future
(image: seattlepi.com)
In the wake of the largely-seen-as-failed climate talks in Copenhagen this month, news outlets, analysts, and politicians alike are trying to wrap their heads around what happened in Denmark. Most agree that the talks were a failure, many blaming the process itself. After all, getting 193 countries, all with their own challenges and interests, to agree on anything is a tall order.
Bloomberg columnist Eric Pooley takes it a step further. He points out that all parties going in to this conference knew it wasn’t going to produce a strong agreement, and that fact hinged on one country alone: the United States. Without a firm commitment from the U.S. Senate concerning emissions reduction, few others were willing to lay their cards on the table, and talks suffered because of it. George Monbiot of the U.K. Guardian said as much, perhaps in a more blunt fashion, in his commentary entitled “If you want to know who’s to blame for Copenhagen, look to the U.S. Senate.”
Tired of Conflict and Instability, Shell Looks to Sell Nigerian Assets
Trying to put out Nigeria’s fires: a burning oil pipeline. (image: smh.com.au)
Sources indicate that Shell is looking to unload its onshore Nigerian assets, the Energy Business Review reports Monday. It appears Shell is looking to sell its interest in oil fields with reserves of 100 billion barrels, valued at $5 billion. Possible buyers include Chinese oil companies Sinopec and China National Offshore Oil Corporation.
The sale appears to be motivated by political and security concerns:
• Political: the Nigerian government seems to be seeking greater control over Western oil development within its borders, as well increasing the amount paid by foreign oil companies to Nigeria
Iran-Iraq Standoff Ends Peacefully, But Oil Pipeline Explodes in Separate Incident
A barbed-wire fence protects an oil pipeline in central Iraq. (image: Chris Stahl via flickr.com)
On Friday HeatingOil.com reported on a confusing account of a possible Iranian incursion into Iraq and seizure of an oil well near the Iraq–Iran border. While the details of the event are still very muddled, it seems that the incident has been resolved peacefully.
The New York Times has reported that on Sunday the Iranian soldiers who occupied the oil field withdrew, but, according to Iraq’s deputy foreign affairs minister Labeed Abawi, the Iranians “are not completely out of Iraqi territory.” No answer was given for the obvious question of where the Iranian soldiers are now. In another confusing statement, Iran’s state news media reported that their troops have returned to their posts along the border, but they never crossed into Iraqi territory. Again, no answer was given for the question of where the soldiers were if they were not at their posts.
Heating Oil Price Trend for December 21: No Change
(image: welt.de and life.com)
After a tumultuous start Friday morning, oil prices moderated and the price of heating oil ended where it began. News that Iran had entered Iraqi territory and occupied an oil well near the border raised concerns that conflict between the two OPEC members would threaten the world’s supply of oil. However, after causing a surge in the price of crude and heating oil, further reports dispelled some fears and stated that Iran has taken similar action before with little effect. Though worries persist over the border dispute, this weekend’s snowstorm in the US Northeast looks to have a larger impact on this week’s oil prices, especially the price of heating oil.
Today’s average retail heating oil price in the Northeast is unchanged from Friday’s average price.
Pipeline Attack Shatters Fragile Peace in Nigeria
Rebel gunboats in the Niger Delta. (image: aljazeera.net)
All is not quiet in the Nigerian delta, according to an article published on Sunday by AFP.
The Movement for the Emancipation of the Niger Delta (MEND) has taken responsibility for an attack on a pipeline operated by Shell and Chevron. The attack has not been confirmed by any outside sources; however, if this indeed did happen, it marks the end of a shaky two-month truce between the rebel group and the Nigerian government. In an article published in NEXT, an online Nigerian news source, MEND claimed that the attack was a “warning shot” and a sign that hostilities between the two could pick up once again. According to an article published Saturday by Voice of America, MEND launched the attack in response to negotiations for a permanent peace between rebels and the Nigerian government that have been stalled by the absence of President Umaru Yar’Adua. The president is reportedly in Saudi Arabia, receiving medical treatment for a heart ailment.
This situation could increase crude oil prices this week as it threatens worldwide oil supplies. That, along with a blast of snow that hammered the northeastern United States, could mean an increase in heating oil prices.
This Week in Heating Oil: December 18
The second week of the UN climate conference in Copenhagen has wound down, and there’s not a lot to get excited about. Disorganization, conflict, and mistrust marred the conference from beginning to end. President Obama’s speech to the conference today failed to bring about any last-minute breakthroughs, and although some sort of eleventh-hour deal could come out of Copenhagen tonight or even tomorrow, it doesn’t appear very likely. For more details on what happened there over the last two weeks, take a look at Kristy Kershaw’s daily reports on the happenings in Denmark.
President Obama’s “Cash for Caulkers” program will not be implemented any time soon, if at all–last Friday, the House of Representatives passed a jobs-creation legislation that did not include Cash for Caulkers or any similar program. Hopefully, the program will get the support it needs some day, but it looks like that day is at least months away.
Some progress was made this week–also last Friday, the US House passed the Wall Street Reform and Consumer Protection Act of 2009, which included limitations on how commodities contracts, including crude oil and heating oil, could be traded. The intended effect of the provisions is a reduction of oil price volatility to make budgeting easier on businesses and individuals who rely on heating oil and other energy products.
Copenhagen Day 12: President Obama’s Speech Leaves Many Disappointed
Copenhagen ends with a bust, with or without the U.S. President's closing speech. (image: washingtonpost.com and nazret.com)
In what could be the final nail in the coffin of the erratic Copenhagen negotiations, President Obama took the stage Friday, saying he was convinced the world could still act “boldly and decisively” on climate change, but offering little in the way of solid examples. The president proposed no further financial commitments of support beyond the $100 billion Hillary Clinton announced yesterday, nor any additional commitments on emissions reductions. He did say America would live up to its pledges to the international community, and hoped the world could walk away with at least something, anything, on paper.
As the Huffington Post pointed out, Obama’s speech was full of open frustration. “I think our ability to take collective action is in doubt,” he said. Even on this last day, the talks are in a state of disarray, with wide chasms still remaining between rich and poor nations, as well as China and the United States. Obama made it clear that the United States’ participation in any deal would be contingent upon accountability and transparency from other nations, specifically China. “Without such accountability, any agreement would be empty words on a page,” Obama said. And without such mechanisms in place, any pact “would be a hollow victory.” Read the full text of Obama’s speech here.
Conflicting Reports on Iran’s Occupation of Iraqi Oil Well
A grim scene from a previous conflict between the two OPEC members, the Iran–Iraq in the 1980s. (image: wikipedia.org)
Several conflicting reports are surfacing out of the Middle East surrounding a supposed Iranian invasion and seizure of an Iraqi oil well. According to Bloomberg, Iranian forces have entered Iraqi territory and seized the number four well in the East Maysan oil field.
Reuters reports that Iraqi Deputy Interior Minister Ahmed Ali al-Khafaji stated that “11 Iranian (soldiers) infiltrated the Iran-Iraq border and took control of the oil well. They raised the Iranian flag, and they are still there until this moment.” However, this statement is only one of many revisions he has made concerning the incident. According to BBC News, al-Khafaji initially denied that any Iranian incursion had occurred. Following his denial, the Deputy Interior Minister said that yesterday’s incursion was only one of many made over the past week. The National Iranian Oil Company has denied any incursion into Iraqi land.
Analyst Flynn: Iran’s Missile, Texas Fog Drove Up Oil Prices This Week
Phil Flynn speculates that the Iranian missile firing earlier this week has harried perceptions of oil market stability among traders, thus raising prices. (image: telegraph.co.uk)
Phil Flynn weighs in on this week’s rise in oil prices in his column in the International Business Times yesterday. We had previously reported that the price increases on Wednesday and Thursday were due to declines in distillate (according to both API and EIA inventory reports) and in crude stockpiles according to EIA, but the API reported a 900,000 barrel rise in crude inventory. Flynn put forth a number of theories about the inventory numbers themselves as well as other causes for the crude and heating oil price increases.
First and foremost, Flynn believes that foggy weather conditions that halted imports in the Houston shipping channel caused a temporary dip in reserves due to a break in the supply chain, and that numbers will rebound next week when the inbound crude hits the system. He does note, however, that demand for heating oil, gasoline, jet fuel and other distillates are up, especially over last year’s numbers for the same time period.
Copenhagen Day 11: U.S. Makes Financing Pledge for Poor Nations, China Responds Favorably, Some Hope in the Talks Restored
Secretary of State Clinton made a huge financial commitment on the behalf of the US that helped moved stalled talks forward in Copenhagen today. (image: blog.nature.org)
Finally, some progress! With just over a day left in the Copenhagen climate talks, some momentum gathered Thursday, as the United States announced an aid package to help poor nations combat climate change. According to the New York Times, Secretary of State Hillary Rodham Clinton said the U.S. would help raise $100 billion a year by 2020, the first real financing commitment to come from the Obama administration.
While Clinton reiterated America’s stance that any such package would be contingent on assurances of transparency from China, the Asian nation responded with a surprising shift in posture. Not only did it signal that developing nations would move to limit their emissions, but also warmed to the idea of outside verification. Chinese Vice Foreign Minister He Yafei told reporters that his country was open to “dialogue and cooperation that is not intrusive, that does not infringe on China’s sovereignty.” As China has been vehemently opposed to international transparency requirements through the whole of the Copenhagen conference, this is definitely progress.
From Copenhagen: Sea Levels Could Rise Up to 29 Feet Over the Next Few Hundred Years
(image: dailymail.co.uk)
A new study emerged out of Copenhagen on Wednesday, claiming that global sea levels could rise by up to 9 meters (roughly 30 feet) in the next few hundred years, even if the world manages to stave off a temperature raise above 2 degrees Celsius. This new estimate is higher than any other that has been predicted so far, and would mean low-lying coastal areas like New Orleans, areas of Southern Florida, Bangladesh, and most of the Netherlands would be severely affected.
Perhaps ironically, the head of the African group of nations proposed a deal today that would cut aid to poor countries by more than half of what has been discussed thus far. Meles Zenawi, the prime minister of Ethiopia, called for $50 billion a year by 2015 and $100 billion per year by 2020, saying that they have more to lose, and therefore must be flexible. The amount of aid due to poor nations has been the subject of intense debate in Copenhagen, with the European Union pledging several billion in the short term, and the United States having yet to pledge anything at all.
While the aid will undoubtedly help poor nations as they attempt to deal with climate change, if no deal is struck at Copenhagen, the news for rising seas levels is not good. Hopefully as more world leaders make their way to Copenhagen over the next few days, negotiations will un-stall and begin to make some real progress forward.
Copenhagen Day 10: Naomi Klein Talks Protests and Progress as a Deal Is Neared on Deforestation
Destruction of the world’s rainforests could be significantly cut back by an agreement that is close to being finalized in Copenhagen. (image: en.cop15.dk)
In an interview with the Huffington Post Tuesday, author and activist Naomi Klein talked about protests and progress, saying there is more at stake here then just getting any old deal on the books. She stressed that the messaging of NGOs to “seal the deal” in Copenhagen is the wrong one. “What’s on the table will NOT save the world,” she said. “We should not fight for just any deal, or at the cost of a deal that in the future would actually mean something.”
Klein went on to say that the United States has set the bar far too low in terms of goals and targets, and thinks the American delegation has “squandered a tremendous amount of goodwill.” See Klein talk to Grist.org about the planned protest that took place earlier today:
