Peak oil notes – Nov 27

Oil prices continued to fall this week setting four-year lows before closing on Wednesday at $73.69 in New York and $77.75 in London. Nearly all attention has been focused on the run-up to Thursday’s OPEC meeting in Vienna. After a series of pre-meeting meetings between individual countries failed to produce any signs of significant production cuts, most analysts concluded that at best OPEC will reaffirm the current 30 million b/d production ceiling (which was exceeded by some 900,000 b/d in October) coupled with some pious statements about how members should adhere to their quotas.
 
In the absence of any movement inside OPEC, several countries are asking for significant cuts by the larger non-OPEC oil producers such as Russia, and Mexico. The Russians have said several times that they are unable to cut production because of their cold climate does not allow producing wells to be closed, but said they might be able to slow the opening of some new wells. Other non-OPEC countries are remaining silent. Mexico is obviously unwilling to give up significant revenue to benefit other countries and nobody has even suggested that the US should slow production if there were any way to do so.
 
Analysts expect that there will be a multi-dollar per barrel price move when OPEC’s official decision is announced with some analysts saying that oil could fall to as low as $68 a barrel on Friday if the decision is reached to maintain something close to current production. A few market observers are even talking about the possibility that London oil could fall to $60 a barrel and even lower in New York. Such a decline would come if traders dumped their futures contracts in fear of still lower prices. However, very low prices such as occurred in 2008 are unlikely to last very long.
 
The US stocks report showed oil production increasing by  73,000 b/d to 9.08 million b/d last week; US crude stocks increasing by 1.9 million barrels to 383 million; and gasoline supplies increasing by 1.83 million barrels. Supplies at Cushing, Okla. increased by 1.33 million barrels to 24.6 million the highest level since April.
 
The extension of the Iranian nuclear talks until July 2015 has emboldened critics of the process in Washington and Tehran. Republicans in the US Congress are demanding new sanctions be imposed on Iran. In Tehran Supreme Leader Khamenei issued a statement saying that the West had failed to bring Iran to its knees through sanctions. To stir the pot further, the Jerusalem Post, speaking for the Israeli government, ran a story saying that “the current proposals in the nuclear negotiations guarantee the perpetuation of the crisis, backing Israel into a corner from which the use of force against Iran provides the only logical exit.”
 
Despite the need for a second extension, some diplomats are optimistic that progress is being made and that an agreement will eventually be reached. The talks are expected to reconvene next month.
 
US natural gas futures have been very volatile this week trading between $4.15 and $4.54 as changing US weather forecasts were issued.