Crude oil broke through the $80 a barrel ceiling repeatedly during the week but kept falling back as hedge funds placed big bets on the Euro’s decline.

The fiscal drama in Greece held global markets hostage much of the week as worries about the impact of the Greek crisis on the euro outweighed comments from Federal Reserve chairman Ben Bernanke about continued low interest rates in the U.S., pushing the euro down against the dollar and damping crude prices.

The euro recovered some ground on Friday amid new reports of European aid for Greece after falling to a nine-month low of $1.3440 on Thursday. Germany’s state-owned bank KfW may take part in a planned Greek bond offering next week, according to market reports.

The Wall Street Journal reported on Friday that a small group of elite hedge fund traders have concluded that the euro could be headed to parity with the dollar and their bearish bets are increasing the downward pressure on the 16-nation currency.

The Journal compared the situation to the hedge fund attack on the dollar in 2008. However, the trades are not expected to lead to a collapse of the currency as the attacks of George Soros on the British pound did in 1992, the paper said.

Positive U.S. economic data on Friday, including a revised fourth-quarter GDP annual growth rate of 5.9%, help crude oil futures claw back some of Thursday’s losses and near the $80 threshold again. Nymex’s benchmark West Texas Intermediate settled at $79.66 on Friday, after topping $80 earlier in the week.

In spite of crude’s difficulties in staying above $80, some analysts issued bullish prognoses for energy futures. Goldman Sachs forecast a new trading range of $85 to $95, up from the $70 to $80 of the past several months, amid supply disruptions from the North Sea and Venezuela and the impact of the Total refinery strike, which was resolved earlier this week.

Other analysts, too, looked for fundamental supply and demand considerations to reassert themselves amid the currency turmoil and lift crude oil futures into a higher trading range. Oil futures prices gained more than 9% in February but remained below January’s highs.

Source: http://www.oilprice.com/article-crude-oil-hits-ceiling-in-week-as-hedge-funds-attack-euro.html

By  Darrell Delamaide of OilPrice.com who focus on, Metals, Crude Oil Prices and Geopolitics To find out more visit their website at: http://www.oilprice.com

While the Iraqi government has made overtures to its Kurdish counterpart in the north to end an oil standoff, much remains in doubt without an actual law keeping the industry in check - rules which this time the Kurds are pressing for rather than Baghdad.

For a long time, the northern Kurdistan region was seen as the most attractive oil market in the country but the latest bid rounds in December and subsequent contract signings in the south have made it suddenly “less clear that Baghdad actually needs an oil law with Kurdistan, because they’re actually doing pretty well on their own,” said David Bender, an analyst in the Middle East practice of the Eurasia Group’s Washington office.

Iraq’s government initially pushed for petroleum-sector legislation, but lately the Kurdistan Regional Government (KRG) has been motivated to act “so they don’t get sort of left behind, with this new international oil interest in Iraq,” Bender argued.

Thirty-eight companies from 17 countries have exploration and production contracts in the Kurdistan region, according to Ashti Hawrami, the KRG’s national resources minister. Several medium and large discoveries have been made, while one private sector refinery has been built and another is almost finished, Hawrami noted in a Feb. 4 government press release.

Baghdad has never viewed oil contracts signed independently by the Kurds as legitimate and blacklisted companies involved in the northern region’s oil fields from working in the south. Oil exports from the Kurdish area stopped last year when companies were not reimbursed.

In recent days, however, the government of Prime Minister Nouri al-Maliki has been considering covering the development costs of foreign firms working in the north, according to media reports, which also cite that oil exports would flow again soon from the north’s Tawke field, operated by Norway’s DNO and Turkey's Genel Energy.

The central government’s ban on companies operating in the Kurdish area will probably remain until the implementation of an oil law, which outlines the sharing of profits, the signing of contracts and the role of Iraq’s National Oil Company, Bender told OilPrice.com. He added the Kurds will presumably want to continue to forge contracts without Baghdad’s involvement.

As of now, only small interests have been doing business with the KRG, “but if the Kurds ever want to attract major oil companies, they will have to come to some understanding with the Iraqi government,” added Bender.

Baghdad’s interest these days in reaching out to Irbil, capital of the Kurdish north, is “more politically based rather than anything having to do with oil,” he maintained. With March 7 parliamentary elections looming, the Kurds may be the “king maker in whatever the next government is, and one of their prices is probably going to be some sort of progress on an
oil law,” he argued. He said eventually an oil bill will be passed but conceded it is “somewhat worrisome that there is no time table.”

Without clearly defined rules in the petroleum sector, heightened international participation in the Middle Eastern country’s oil market has forced dealing with certain issues through a budgetary process, Bender said. This year’s budget spells out that provinces will be paid $1 per barrel for oil or gas they produce, while the provinces, namely the Kurdish north, have to agree to export oil or face a fine, he continued.

The whole country’s proven oil reserves were last estimated at 115 billion barrels, and analysts have speculated Iraq will boast some six million to 10 million barrels a day over the next several years.

While different stakeholders argue over spreading around the oil wealth, some doubt the optimism of these predictions.

Robert Ebel, a senior adviser in the energy and national security program at the Center for Strategic and International Studies, a Washington-based think tank, told OilPrice.com he has heard Iraqis boast that more oil will flow from their country than from Saudi Arabia.

“I take all that with a huge grain of salt because I don’t think it’s doable,” Ebel said, adding he has a “huge doubt” about how quickly Iraq can produce oil, sell it abroad and bring back money into the country. Responding to all of these contracts will take time, as well as a “tremendous amount of equipment” and personnel, he added.

And the key, Ebel said, is the fate of all that money. “Is it spent properly, or is it lost to the corruption and the variety of projects that don’t really have that much importance to the economy?”

While the petroleum law remains paramount, the dispute over the Kirkuk region is also a major stumbling block that may cause problems for the nascent oil industry. Kirkuk finds itself front and center in the fight between Iraqis and Kurds over certain disputed territories.

“In the case of the Kurds, Kirkuk remains an extremely volatile situation. Right now, the U.S. is sort of forcing Kurdish and Arab security forces to cooperate and even that is highly controversial,” Bender added. U.S. forces are set to depart next year. Whether such strategic cooperation between local militaries will continue is a lingering question, he warned, and “whether the security forces will start fighting is certainly a possibility.”

By. Fawzia Sheikh for OilPrice.com who focus on Metals, Oil Prices and Geopolitics. To find out more visit their website at: http://www.oilprice.com

An easing of the crisis in Europe gave energy markets a firm tone last week that enabled crude oil futures to gain nearly 8% amid mixed economic news and some concerns about supply.

A strike at French oil refineries lifted prices to a five-week high Friday, with the benchmark West Texas Intermediate finishing the week at $79.81. The French strike threatened to limit U.S. imports of refined products from Europe.

Earlier in the week, the show of solidarity by European Union governments regarding fiscal problems in Greece and other countries in the eurozone, eased concerns about the crisis there and downward pressure on the euro.

A move Thursday by the Federal Reserve to raise the discount rate – the rate it charges banks for emergency loans – did however propel the dollar higher against the euro. News on Friday that the core inflation rate in the U.S. actually fell 0.1% in January – the first decline since 1982 – dispelled worries that the Fed would need to tighten further interest rates to combat inflation and led to a lower dollar on Friday.

The weak consumer price index and another weekly increase in jobless claims provided further evidence that U.S. economic recovery continues to be weak.

The weekly report on oil inventories, coming a day late because of the Monday holiday in the U.S., showed increases in crude oil and gasoline stocks but a bigger-than-expected drop in distillates, which includes heating oil. This news buoyed crude oil prices.

A coup in African oil producer Niger on Thursday added to some supply concerns at the end of the week to support higher crude oil prices.

Hedge funds and other speculative traders sharply increased their net long positions in crude oil futures in the week ending Feb. 16, according to trading data from the Commodity Futures Trading Commission, after having reduced them in the previous week.

Andrew Hall, the head of Phibro, is seeking new investors as he reorganizes his hedge fund operations in the wake of Phibro’s move from Citigroup to Occidental Petroleum. Hall, who specializes in energy trading, will manage the new Astenbeck Capital Management, named after a town in Germany where he owns a castle. According to the Financial Times, Astenbeck will take over management of two oil funds previously operating under Phibro’s aegis.

Hall was the energy trader who created a controversy while still working for Citi because of his $100 million bonus. The bonus was deemed politically unacceptable while the bank was receiving a taxpayer bailout and led to Citi selling Phibro to Oxy Pete.

Source: http://www.oilprice.com/article-oil-prices-rise-amid-mixed-economic-data-as-euro-concerns-ebb.html

he Libyan government has been sounding off lately about boosting the profile of its oil and gas market, but it’s questionable whether international companies will ignore the government’s missteps in the industry - not to mention the recent lackluster energy finds - and keep injecting money into the North African country.

The head of Libya’s National Oil Corp., Shokri Ghanem, has his eye on expanding gas exploration and production in a bid to raise exports to Europe, as well as privatizing oil refineries and the petrochemical sector, according to an interview he gave this month to the Oxford Business Group.

Once an international outcast for its penchant for terrorism and weapons of mass destruction, Libya now wants foreigners to take a greater stake in the oil market and in turn encourage local firms to play a larger role as well.

More than two-dozen companies from around the world are betting on Libya these days, said Ronald Bruce St John, an analyst for Foreign Policy in Focus, a Washington-based think tank. He has served on the international advisory board of the Journal of Libyan Studies and the Atlantic Council Working Group on Libya. The government of Muammar Gaddafi has relied on foreigners to scout for new wells and bolster current production, “if they’re ever going to come close” to a target of three million barrels a day, he explained.

The burning question, though, is “how profitable would it be” for an overseas oil concern to forge ahead in the country’s hit-or-miss exploration climate, a situation made even more dicey by Tripoli’s erratic policy moves, St John told OilPrice.com. Libya’s national oil company chief has talked about the need for foreign investment over the last few years, he noted, but this time Ghanem’s words follow months of government bungling and less-than-stunning results in the oil and gas fields.

One of last year’s biggest shocks was Gaddafi’s suggestion to nationalize the country’s oil and gas interests, a consideration that seemed to echo the early days of the Libyan revolution when the industry was partially nationalized. These words set the stage for the National Oil Corp. to renegotiate long-term contracts in Libya’s favor with major oil companies operating in the country, such as Italy’s ENI, the United States’ Occidental, PetroCanada, France’s Total and Spain’s Repsol, St John added.

International investors were also a little unnerved by the Verenex Energy Inc. fiasco, St John added. He said the small Canadian oil exploration player was the only company to make a sizeable discovery – more than two billion barrels of oil – under strict EPSA, phase four, contracts awarded after 2005.

But Libya’s interference in negotiations between Verenex and the China National Petroleum Co. over the sale of the Canadian firm’s exploration contract drove down Verenex’s share price by 30 percent and forced it to sell the contract to Libya at 70 percent of the original offer to China, he said.

Dampening enthusiasm still more, no company under these 2005 agreements has scored big in oil apart from Verenex, St John maintained.

So where does this all leave Libya and its nervous investors today?

Ghanem’s latest declarations are obviously attempts to “put a positive face on an industry that has not been going well in the last 12 to 18 months,” St John said, adding that these events have prompted “great uncertainty” in the oil and gas industry, and “a lot of that’s their own fault.”

The oil chief is a little anxious that international companies potentially stumbling across petroleum finds may one day “cap the wells,” while unsuccessful players will pull out entirely, St John said.

And now, a sector which has been “relatively efficient and transparent” is following other parts of the Libyan economy that so far have rejected reforms, he warned, saying the oil industry seems to have fallen prey to conservative factions within the government coveting more control.

The Gaddafi government is arguably on an uneasy footing as it makes a play for more international money, noted Simon Henderson, a Baker fellow and director of the Gulf and energy policy program at the Washington Institute for Near East Policy.

Within the Libyan government there is resistance to encouraging more foreign investment in the oil market, but Ghanem’s argument is the country cannot go it alone, said Henderson. The North African country sorely needs foreign investors but wants them to view such requests as a partnership rather than as an invitation to take over sectors of the economy, he explained.

“The difficult challenge is at home, Arab nationalism is a very strong thing,” Henderson told OilPrice.com “Foreign investors are seen as diminishing Arab nationalism and therefore are resisted ideologically. And from a foreign investor’s point of view, selling the notion to your shareholders that you can get a good agreement with an apparent eccentric like Col. Gaddafi is questionable.”

For the most part, larger companies will probably “soldier on,” predicted St John, but smaller companies will be more careful about “how much, and how fast” they invest in Libya -- especially if there’s a better game in town.

Source: http://www.oilprice.com/article-libya-courting-oil-and-gas-investors-but-faces-a-tough-sell-following-recent-government-fiascos.html

By. Fawzia Sheikh for OilPrice.com who focus on Fossil Fuels, Metals, Crude Oil Prices and Geopolitics To find out more visit their website at: http://www.oilprice.com

Crude oil prices took a dive on Friday after a week of gains from U.S. blizzards were undercut by another move in China to tighten monetary policy.

China’s central bank raised reserve requirements for its banks for the second time this year as it tries to curb lending and avoid asset bubbles from forming in an overheated economy. China is the world’s second-largest importer of oil, after the U.S., and one of the world’s fastest-growing economies, so energy markets are very sensitive to any change in conditions there.

Blizzard conditions in the U.S. Northeast had propelled West Texas Intermediate prices back up above $75 earlier in the week. But a decline of some 1.5% on Friday pushed prices down near $74 a barrel again. Still, oil was ahead about 4% on the week.

A revised forecast from the International Energy Agency raised expected demand for crude this year by 120,000 barrels a day to 1.6 million. However, the IEA said the increase was due to growth in emerging economies, with demand remaining flat in industrial countries, despite the unusually severe winter. The new moves in China raise question marks about that anticipated increase in demand.

U.S. data on inventories, which came out late due to snow-related government closures in Washington, showed gasoline inventories rising by 2.3 million barrels, about 1%, much more than expected. But analysts said that may be due to the simple fact that people aren’t able to drive in snowbound cities. Distillate inventories, including heating oil, fell less than expected despite the inclement weather.

A pledge by European Union leaders that they would do what it takes to keep Greece from sliding into default briefly took some of the pressure off the euro, but markets remained concerned at the lack of detail about any rescue plan. A weakening euro means a stronger dollar, which puts downward pressure on energy futures. The crisis in southern Europe threatens economic recovery in the EU and further dampens optimism for energy demand.

Bloomberg reported that Gary Gensler, chairman of the Commodity Futures Trading Commission, is proving to be a formidable adversary for hedge funds and other participants in derivatives trading as he pushes for reform, including restrictions in energy futures trading. Despite, or perhaps because of, his 18 years at Goldman Sachs, Gensler is insisting on position limits for energy trades and trying to close any loopholes that would let funds slip through on end-user exemptions, Bloomberg said.

Source: http://www.oilprice.com/article-chinas-monetary-moves-undercut-crude-oil-rally.html

By Darrell Delamaide for OilPrice.com who focus on Fossil Fuels, Alternative Energy, Metals, Crude Oil Prices and Geopolitics. To find out more visit their website at: http://www.oilprice.com