2011 Brief: Brent crude oil averages over $100 per barrel in 2011 - Source EIA

2011 Brief: Brent crude oil averages over $100 per barrel in 2011

Source: U.S. Energy Information Administration, based on Thomson Reuters.
Note: Brent is the underlying crude oil for the light sweet crude oil futures contracts on the Intercontinental Exchange (ICE). West Texas Intermediate (WTI) represents the spot price for crude oil at Cushing, Oklahoma, the physical delivery hub for NYMEX light sweet crude oil futures contracts.

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This article continues a series of briefs on energy market trends in 2011.

The crude oil markets sustained high price levels in 2011, as the spot price of Brent averaged $111.26 per barrel, marking the first time the global benchmark averaged more than $100 per barrel for a year (see chart above). The West Texas Intermediate (WTI) crude oil price averaged $94.87 per barrel, up $15 per barrel from 2010, reflecting a discount to the Brent crude oil price due to transportation bottlenecks near Cushing, Oklahoma, the physical delivery hub for NYMEX light sweet crude oil futures contracts.

The price increases in 2011 reflected tightness in the global crude oil market that began in 2010 and marked the highest crude oil prices since 2008. Key factors affecting crude prices in 2011 included:

• Arab Spring. The Arab Spring and the civil war in Libya roiled oil markets during the first half of the year. Prices quickly escalated when protests in Libya intensified in late February. The spot price of Brent increased $15 per barrel from February 18 to March 2 as the market coped with the loss of 1.5 million barrels per day (bbl/d) of exports from Libya. With low spare production capacity, this sudden supply loss challenged the ability of the Organization of the Petroleum Exporting Countries (OPEC) producers to provide incremental supplies to an already tight market.
• Demand. Demand growth in emerging markets, notably China and the Middle East, drove crude oil prices higher in 2011 as well. During the first six months of 2011, the demand for petroleum products in countries not part of the Organization for Economic Cooperation and Development (non-OECD) grew by almost 4%, just as the market was coping with the loss of Libyan exports. Even with declining OECD country demand in 2011, overall global demand rose by 1.2% (1.1 million bbl/d).
• Transportation Bottlenecks. Brent's price strength in the first half of 2011 was not matched by WTI, which became dislocated from the global crude oil market due to transportation bottleneck issues in the U.S. Midwest (see chart below). Amid fast-rising crude oil production from the Bakken Shale formation and Canadian oil sands, prices for U.S. inland crude benchmark WTI weakened relative to those of broadly traded coastal or imported crude oil grades, such as Brent or Louisiana Light Sweet (LLS). Brent's premium to WTI reached a record level of almost $30 per barrel in September 2011. Between October and November the premium fell almost $20 per barrel, most likely as a result of signs that transportation constraints out of the U.S. Midwest, the main market for WTI, were easing. However, the spread ended the year close to $10 per barrel, still wide by historical standards.

Source: U.S. Energy Information Administration, based on Thomson Reuters.

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While WTI experienced a wide trading range in 2011, as its isolated market depressed the crude's value, Brent and other waterborne crudes maintained a fairly stable trading range anchored around $110 per barrel from May through the end of the year. Factors mitigating upward crude oil price pressure in 2011 included:

• Debt Crisis. The European debt crisis loomed large over the global economy, and expectations for economic growth globally, especially in the OECD economies, were not realized over the course of the year, resulting in lower-than-expected growth in demand for petroleum products.
• Strategic Petroleum Release. In response to the loss of Libyan supplies, the International Energy Agency's member countries collectively released stocks from their strategic petroleum reserves during the summer months.
• Supply Gains. Output increases from Saudi Arabia (OPEC's largest producer) and the return of Libyan oil production helped dampen price increases during the second half of the year.

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US hits Chinese, other firms over Iran business - Source AFP

US hits Chinese, other firms over Iran business

WASHINGTON, Jan 12, 2012 (AFP) - Washington placed sanctions on three companies from China, Singapore and the United Arab Emirates Thursday for selling refined oil products to Iran.
A day after US Treasury Secretary Timothy Geithner met Chinese leaders on how to boost pressure on Tehran to halt its alleged nuclear weapons program, the Treasury placed sanctions on Zhuhai Zhenrong Co. of China, which it called the largest supplier of refined petroleum product to Iran.
Also hit with sanctions were Singapore trader Kuo Oil and the UAE's FAL Oil Co.
Under the sanctions, all three companies are barred from receiving US export licenses, trade support from the US Export Import Bank, and loans over $10 million from US financial institutions, Treasury said.

It said Zhuhai Zhenrong had brokered the delivery of more than $500 million in gasoline to Iran between July 2010 and January 2011, far higher than thresholds the US had set for allowable deals.Kuo did $25 million in refined petroleum business with Iran in late 2010 and early 2011, while FAL provided $70 million in refined products to Iran in late 2010, also breaking the thresholds.

"The United States is working with international partners to maintain pressure on the Government of Iran to comply with its international nuclear obligations," the Treasury said.China, long an important customer for Iranian oil exports, has resisted adding any strong support to US and European efforts to tighten pressure on Tehran to halt its nuclear program.
Vice foreign minister Cui Tiankai warned this week against making any links between China's trade relations with Iran and pressure on Tehran's nuclear program.
But politicians in the US Senate have called for tougher action on China to get it into line with the US and EU position, saying sanctions should hit the country's three largest oil companies: Sinopec, China National Offshore Oil Corporation and China National Petroleum Corporation.

On Thursday European diplomats said they were closer to an agreement on an embargo on Iranian oil, that would give EU companies six months to phase out contracts with Iran.pmh/jm

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Euro edges up on eased worries over Europe - Source AFP

Euro edges up on eased worries over Europe

TOKYO, Jan 13, 2012 (AFP) - The euro firmed against other major currencies in Asia on Friday as investor confidence improved after successful bond auctions by debt-ridden Italy and Spain.

The euro edged up to $1.2831 and 98.48 yen in Tokyo afternoon trade from $1.2816 and 98.38 yen in New York late Thursday.

The dollar was at 76.75 yen, unchanged from New York.

Currency rates hardly changed after Japan's Prime Minister Yoshihiko Noda reshuffled his cabinet. Noda replaced five ministers but heavyweight posts including foreign affairs, finance and trade were not changed.

The euro got support from assurances from the European Central Bank and confidence-building successful Italian and Spanish bond auctions.

The euro remains biased to the downside but a recovery to $1.30 could not be ruled out if credit rating agencies decide not to downgrade France's sovereign debt rating, said a senior forex manager at a Japanese bank.

It would be "not surprising to see the pair recover to 1.30 next week or so", he told Dow Jones Newswires.

France is seen as a candidate to lose its triple-A credit rating and such a move would put the eurozone rescue fund's firepower in doubt, which could weaken the single currency.

At its first policy-setting meeting of this year, the ECB held its main interest rate steady at 1.0 percent, as expected, following two straight months of cuts.

Bank chief Mario Draghi told a news conference that recent moves to provide banks with unprecedented amounts of liquidity were proving effective in tackling the debt crisis.

The dollar was mixed against regional Asian currencies, easing to 31.77 Thai baht from 31.82, to Sg$1.2875 from Sg$1.2928, to 43.85 Philippine pesos from 43.99 and to 1,149.30 South Korean won from 1,158.20.

It firmed to 9,180.00 Indonesian rupiah from 9,160.00 while holding steady at at Tw$29.95.

bur-mis/dan

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Oil prices steady amid supply-demand tensions

Oil prices steady amid supply-demand tension

LONDON, Jan 13, 2012 (AFP) - Oil prices steadied on Friday at the end of a week in which the prospect of reduced energy demand offset tight supply worries caused by turmoil in key crude producers Iran and Nigeria.
New York's main contract, West Texas Intermediate for delivery in February edged up 17 cents to $99.27 a barrel.
Brent North Sea for February dropped 44 cents to $110.82.
"Geopolitical supply side issues continue to be the key bullish factor affecting oil prices," said Victor Shum, senior principal at Purvin and Gertz international energy consultants in Singapore.

"Besides Iran, the more immediate concern that could affect supply are the strikes in Nigeria."But a surprisingly big increase in US crude oil reserves announced this week have hit oil prices already under pressure from eurozone debt worries heightened by slowing growth in Germany.

On Friday meanwhile, a nationwide strike over the removal of fuel subsidies that has locked down oil-rich Nigeria entered a fifth day after talks between the president and labour leaders failed to reach a deal.The main oil workers union has threatened to shut down crude production by the weekend if the government did not reverse the decision, a move that more than doubled fuel prices in Africa's top crude exporter.
Nigeria produces more than two million barrels per day and is a key oil supplier to the United States and European Union.
Meanwhile, concerns over an immediate disruption in Iranian crude exports have eased on news that the threatened EU oil embargo on Tehran might not take effect for six months, analysts said.

The phased implementation of the embargo would make the break less painful for financially stressed European countries that depend on Iranian crude -- Italy, Greece and Spain.The EU is collectively the second-biggest destination for Iranian oil exports after China, taking in about 450,000 barrels per day.
According to the New York Times, the United States has used a secret channel to warn Iran's leaders against closing the strategic Strait of Hormuz, saying that doing so would provoke a US response.
Iran has threatened to close the narrow and strategic waterway -- a chokepoint for one fifth of the world's traded oil -- in the event of a military strike or the severe tightening of international sanctions.
The United States and its allies have stepped up increasingly harsh sanctions on Iran over its nuclear enrichment programme, which they have charged is part of a secret drive to develop nuclear weapons.
Iran has insisted its nuclear programme is entirely peaceful and vowed to retaliate against any strike on its facilities.
burs/bcp/rfj/arp




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Texas Colleges Aim to Get in Sync With Labor Market

Enlargephoto by: Callie Richmond

Students listen to their instructor, Curtis Collins, during their Pumps, Compressors and Mechanical Drives class at Texas State Technical College Waco.

Assaying the output of higher education in Texas, Michael Bettersworth evoked the image of a crippled Apollo 13 craft hurtling into space, its future uncertain.
“Houston, we have a problem, and it’s not that too few people are going to college,” said Bettersworth, an associate vice chancellor at the Texas State Technical College System. “It’s that too many people are getting degrees with limited value in the job market.”
Students throughout Texas are amassing college credits without knowing whether they will lead to employment, and many face serious debt when they graduate.
Meanwhile, the state’s population of skilled laborers is aging and approaching retirement, and there is a dearth of recent graduates with two-year vocational degrees who can take on those jobs.
Experts say a retooling is in order if the state hopes to expand its manufacturing industry.

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As the economy begins to show signs of life, efforts are under way at two-year colleges across the state to make programs more responsive to the labor market. Some Texas leaders are trying to reverse the trend toward encouraging students to attain the highest degree possible.
“It’s not that we don’t need engineers and Ph.D.’s and research scientists,” said Joe Arnold, a government affairs manager with BASF, a chemical company. “We do, but that’s not all we need. We need skilled craftsmen. We need operators.”
The Texas State Technical College System was established in 1969 with the mission of supplementing the state’s work force. Recently, the four-campus system joined Credentials That Work, a new project run by the Boston-based nonprofit Jobs for the Future, which uses new technology that scrapes information from online job postings and provides real-time labor market information. The technology also offers information on which skills — in addition to simply which degrees — employers are seeking.
“Schools have to nail it pretty much in terms of producing graduates that respond to the needs of the marketplace,” said John Dorrer, the director of the Credentials That Work program.
However, even when degrees can be tailor-made to fit companies’ needs, students still must be persuaded to pursue them. Mike Reeser, the TSTC chancellor, said there was “a misperception in the country that the worst bachelor’s degree is more valuable than the best associate’s degree.”
Tom Pauken, the chairman of the Texas Workforce Commission, said one of his top priorities this year would be countering that notion. “I think we’ve got to revisit this entire issue,” he said. “We’ve gotten completely away from the idea that we’ve got different talents and there are different approaches in terms of education.”
Should Pauken’s campaign be successful, there will remain the matter of financing. With budgets being slashed at all levels of education, resources are tight, and more highly specified training is expensive.
“We have to be more efficient, we have to be more effective, and we have to rely on employers for more support,” said Bettersworth, the associate vice chancellor.
Increasingly, manufacturing companies are taking the initiative by investing in community colleges in order to produce the workers they need.
This year, for example, BASF will give Brazosport College in Lake Jackson the final installment of a $1 million grant for the creation of a new facility devoted to the petrochemical, energy and nuclear industries. This academic year was also the first of five years in which the company would provide $50,000 in scholarships.
“Community colleges are workhorses for us,” Arnold said. “The problem is there aren’t enough people going to them seeking education that will put them to work for us.”
Arnold is on a Texas Association of Manufacturers committee that is looking into the causes. So far, he said, there certainly seems to be an image issue.
“People know that we need more manufacturing, but they don’t think of those jobs as something they want to send their kids to go do — or to do themselves,” he said.
But Leo Danna, 20, who enrolled at the TSTC campus in Waco after two years at Tarleton State University in Stephenville, said the switch has worked for him.
“That kind of college wasn’t right for me,” he said. “I couldn’t focus and didn’t understand what I was going to do when I graduated. Here, in the first semester, you’re already talking to companies in your field.”

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Truckload Carriers Taking Accessorial Charges to Shippers

William B. Cassidy | Sep 29, 2011 12:17PM GMT The Journal of Commerce Online - News Story

• Truckload
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• United States

One-time fees for special services high on carriers’ negotiating list, TCP says

More than two-thirds of truckload carriers plan more use of accessorial charges, adding income from shipping fees to higher rates, Transport Capital Partners said.
The consulting firm said 68 percent of the carriers it surveyed in the third quarter plan to renegotiate accessorial fees across more categories with shippers.
Those accessorial fees include detention charges, mentioned by 42 percent of carriers, and fuel surcharges, which 39 percent of the carriers hoped to renegotiate.
And the percentage of carriers that expect to renegotiate their contracts to change the mileage standard they use to bill shippers tripled, rising to nearly 20 percent.
Those carriers hope to move from shortest-route mileages favored by shippers to a practical mileage standard that more accurately reflects distances traveled.
“Short miles are a hangover from the regulated era of three decades ago and do not reflect current realties of miles ran, fuel consumed, scarce driver hours used, and equipment utilization,” said Richard Mikes, a partner at the consulting firm.
Package giants UPS and FedEx Express have long used accessorial charges to collect additional fees for special delivery services on a transactional basis.
Trucking companies include accessorial fees in their tariffs and contracts, but often are known waive them, depending on the customer and market conditions.
In a post-recession era of tight capacity when carriers hold pricing power and are focused on rebuilding margins, truckers are likely to collect on accessorials.
Truckload rates continue to rise in the third quarter, as well, though at a slower pace. Forty-seven percent of the carriers surveyed by TCP saw rates rise 5 percent.
Slightly more than 36 percent of the carriers said rates remained stable, compared with 17 percent in the second quarter — the highpoint this year for rate hikes.
Truckload carriers also hope to use their market leverage with shippers to negotiate shorter payment periods, which would help their cash flow, TCP said.
Contact William B. Cassidy at wcassidy@joc.com. Follow him on Twitter at @wbcassidy_joc

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States Prepare for Shell Ethane Cracker News - Source Wheeling News-Register

Which Will It Be?

States Prepare for Shell Ethane Cracker News

 

By CASEY JUNKINS - Staff Writer , The Intelligencer / Wheeling News-Register

 

WHEELING - Officials throughout West Virginia, Ohio and Pennsylvania are eagerly awaiting to hear which state will get the multibillion-dollar Shell Chemicals ethane cracker.
Dan Carlson, general manager of new business development for Shell, said his company would make its final decision on where to locate the large petrochemical plant in early 2012.
"We have been meeting with representatives of Pennsylvania, Ohio and West Virginia over the past few months and have had productive discussions with them," he said. "Leaders from all three states have shown great interest in having us build our cracker there. We won't comment on the proposals from the states as we continue discussions with them," Carlson added of the facility, which he said would employ 10,000 construction workers before eventually employing "several hundred" permanent chemical workers.
Shell's parent company, Royal Dutch Shell, announced plans for the cracker earlier this year, but only noted the facility would be built somewhere in Appalachia.
Carlson later declared the plant would cover hundreds of acres.
Leaders across West Virginia have been scrambling to attract the large petrochemical plant.
In addition to the direct jobs at the cracker, an American Chemistry Council study showed that gaining a cracker would help West Virginia create about 12,000 new permanent jobs in related businesses.
Initially, many believed the plant would be a good fit for the Northern Panhandle because the area is situated in the middle of the Marcellus and Utica Shale fields.
Officials with Bayer Corp. said the company's site north of New Martinsville would be a prime location because of the proximity to rail, road and water transportation. However, Bayer officials also believed a site in Institute, W.Va., near Charleston would also be prime for a cracker plant. Bayer spokesman Bryan Iams could not be reached for comment.
Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association, and Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia, each said they had heard nothing more on the cracker last week.
According to published reports, West Virginia Secretary of Commerce Keith Burdette may ask state legislators if they would vote to allow reducing personal property taxes for Shell - or any other cracker developer - to a 5 percent maximum charge for 25 years.
Existing law allows the state to reduce the personal property tax rate to 5 percent for a maximum of 10 years. Burdette could not be reached for additional comment.
Officials in Ohio have also shown great desire to attract the cracker to their side of the Ohio River. The chemistry council estimates the cracker would help the Buckeye State generate 17,000 jobs in chemistry and supplier industries, as well as $1 billion in Ohio wages and $169 million in state tax revenue.
According to Greenwire, which is a national environmental and energy news service, Ohio leaders are offering $1.4 billion in tax incentives to Shell to entice the company to locate the cracker there. Officials with Gov. John Kasich's office could not be reached for comment regarding this report.
Thomas Stewart, executive vice president of the Ohio Oil and Gas Association, said he was unaware of any new developments regarding the cracker, but expressed optimism.
"It is my fervent hope that Ohio can land this facility," he said.
"It would really do a lot to enhance the whole future of our industry here."

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