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30 May 2015

Press review 30-05-2015 - Entering the dolldrums

Commodities markets were generally down this week and petroleum was no exception. The Brent index was particularly hit in the first days of the week but would eventually recover throughout Friday, pretty much to where it started the week. The month of May goes by leaving the index hardly unchanged at 65 $/b.

In terms of relevant news this was in general a quiet week, perhaps reflecting the stagnation in prices. There is some buzz rising above the background noise around a decline of crude inventories in the US. Some claim it is refining picking up ahead of the "driving season", others say the it is "shale oil" extraction giving in to low prices. In reality these are relatively small movements that square well with a nearly flat futures curve. The hard data that will eventually tell who is wrong and who is right in this debate will only be available by year's end.

23 May 2015

Press review 23-05-2015 - Islamic Steamroller

The Islamic State has managed to resume its advances, taking some months to adapt to NATO's involvement in Iraq. In Syria it advances through the south, while in the North al-Qaeda affiliates complete the encirclement to Bashar al-Assad's regime. In Iraq Ramadi was finally taken, after an on-and-off combat that lasted over an year. The Iraqi Shiites are clearly disturbed by another rotund defeat of their US-trained Army. Next in-line to come in the fray are the militias, possibly with weaker training and equipment; right behind them is Iran.

The Brent index seems to be forming a plateau at the moment, clearly below what an healthy petroleum industry requires. Analysts process the figures, scanning for that elusive "peak oil" - 2014 is starting to look a good candidate. In the end it could all be meaningless in face of the swelling Sunni-Shiite wars rocking the Near and Middle East. With bullets flying so close to the most valuable petroleum assets in the world, nothing can be taken for granted.

16 May 2015

Press review 16-05-2015 - Worrying advances

The Brent index closed another week of gains just an hair shy of 67 $/b. Since the beginning of the year the benchmark that prices more than half the petroleum traded internationally has climbed almost 40%. This price is however far from meaning solace to the much battered petroleum industry; the negative outlooks succeed one after the other and every other day the media reports on some troubled company. Some cry "peak oil", likely precipitously. As in the past, the of fate of petroleum will possibly be determined by geo-political events.

Syria has been persistently in the news with the Sunni advancing fast toward the capital. Some media claim the Sunni have received advanced military technology that is decimating the cavalry divisions of Bashar al-Assad's regime. The fall of Damascus appears now a matter of time. The question then is: where will the Sunni turn to next? Will they pursue the western front towards Lebanon, or will they focus on the eastern front in Iraq? Irrespective of the outcome, the Sunni are already regaining the initiative in Iraq, once again attesting to their superior logistics and warfare practice.

09 May 2015

Press review 09-05-2015 - The Tesla hype

This week was marked by the hype created around the stationary battery put on sale by Tesla. The news were out last week, but since there was nothing outstanding about the figures presented, it was not part of the last review. However, the web soon burst with excitement, even with anti-renewables outlets lending a great deal of attention to it.

There is nothing special about the Tesla technology, lagging the competition in various aspects, but the hype is a case study in itself. Almost at the same time Toshiba firmed one more contract with its own stationary Lithium ion technology, that is supposed to last 6 to 7 times longer that Tesla's. To that the media remained widely silent, while on Tesla they went wild. Forbes started by claiming a manufacturing cost of 0.02 $/kWh, meaning it would be essentially free. It then switched discourse to claim that figure was relative to operational costs - but even in that case it still remains ridiculously low.

Once again the media appears little interested in informing the public, it ignores relevant developments while promoting dubious products. As long as the hype lasts there is money to be made in stock markets; but at some point reality settles in. This same dynamics was in great measure responsible for the shale sub-prime bubble.

06 May 2015

Units of Volume

Some weeks ago I was involved in a long e-mail discussion over units of with American colleagues. Arguments went back and forth, but we could not agree on what Tf3 meant.

I finally came to the conclusion that Tf3 has a different meaning in the US. The unit prefixes used there, even if graphically similar, are not interpreted the same way as the prefixes of the International System of Units (ISU). These differences are likely unknown to most outside the US (like they were to me) and are possibly the source of many errors.

There is also a linguistic twist to this matter that is important to note.

02 May 2015

Press review 02-05-2015 - Still under the waterline

The Brent index is still holding well to its rally, closing the week near 66 $/b. The WTI index, used to price petroleum extracted in the US, is in contrast under 56 $/b, a difference of almost 20%. The price rally is not really happening across the Atlantic, leaving the American industry without relief for now.

Geo-political developments continue to dominate the economic outlook for the years to come, with competing powers continuously challenging the dominant role NATO acquired after the fall of the USSR. There are many points of tension around the globe, which could not possibly be entirely covered in this review. But by focusing on energy flows, it is clear other actors now have a say in the plot of this show.