Briefs - November 10, 2008

• Jeff Rubin, Chief Economist at CIBC World Markets says that the current recession is caused by high oil prices. Defaulting mortgages are only a symptom of the high oil prices. Higher oil prices caused Japan and the Eurozone to enter into a recession even before the more recent financial problems hit. Higher oil prices started four of the last five world recessions; we shouldn’t be too surprised if they started this one also. (11/5, #25)
• South Korea imported 1.4 percent less crude in October as the global credit crisis sent shockwaves through Asia’s fourth-biggest economy and a weakened currency inflated the cost of buying fuels. (11/3, #10)
• For years, rising global oil demand was as predictable as the seasons. Not anymore. A starker economic outlook has some high-profile energy analysts predicting the world will consume less oil next year than this year as emerging markets, led by China, cool off. Such a situation would be the first annual contraction since the early 1980s. (11/6, #6)
• Saudi Arabia may renegotiate contracts for long-term oil and gas field projects as falling oil prices and the credit crunch bring down costs, an oil official said in remarks published on Wednesday. (11/6, #9)
• Brazil’s newly discovered “pre-salt” oilfields may contain more than 100bn barrels, according to Haroldo Lima, head of the industry regulatory. Lima said just the pre-salt oilfields already under concession may contain between 50bn and 80bn barrels and that the total area could surpass 100bn barrels. (11/8, #8)
• Brazil’s Petrobras, even as it eyes greater output for the future, exported a record 574,000 b/d of oil in October. (11/6, #14)
• Ouput from Brazil’s Tupi, Iara and Guara deep water fields in the Santos basin off the Brazilian coast should hit 300,000 barrels of oil equivalent a day by 2012. (11/5, #11)
• The fledgling Brazilian deepwater rig industry is running up against the realities of the tight credit market. Several of the contract winners haven’t been able to borrow money needed to finish construction on the rigs they promised, which can cost more than $600 million each. Should their struggles continue, Brazil’s hopes to increase production by 2 million barrels of oil equivalent a day by 2015 are at serious risk. (11/7, #8)
• Mexico risks a revenue shortfall next year due to falling oil prices and production that will be only partially offset by a weaker local currency. Mexico based its 2009 budget on an average oil price of $70 a barrel but its average crude price closed Thursday at $43.65. Credit Suisse expects Mexican crude to average $50 a barrel next year, leading to a revenue shortfall of $7.6 billion. However, hedging by the government might limit a potential revenue shortfall to $3 billion. (11/8, #10-11)
• Venezuela started drilling for natural gas off the Caribbean coast on Friday with the assistance of Russia’s OAO Gazprom, a new step in the closer economic and energy relations between the two countries. (11/8, #12)
• With plunging oil prices, the profit outlook for the oil sands has become bleak. High costs for labor and materials have pummeled budgets, with some analysts suggesting that projects need prices north of $100 a barrel to earn a decent return. Canadian oil-sands developers are cutting investment plans by 20 percent. (11/8, #17-18)
• Auto sales in China have plummeted this year and air travel is declining. Economists expect the economy to expand at an annualized rate of as little as 5.8 percent in the fourth quarter this year, down from nearly 11.2 percent in 2007. Many say the days of 10 percent growth may not be back for a while. (11/7, #9)
• China may halt diesel imports for a second month in November because of rising stockpiles, traders said. Fuel inventories have risen as oil-product consumption fell after the world’s fourth-largest economy grew at the slowest pace since 2003 in the third quarter. (11/5, #12)
• China’s Sinopec, Asia’s biggest oil refiner, will process less crude-oil at refineries with “relatively low profitability” because of falling fuel demand, its parent said. (11/3, #8)
• Oil and gas drilling will take a big hit in Alberta next year, with 1,350 fewer wells forecast by the Petroleum Services Association. Some new rules make it more attractive for companies to diversify into places like B.C. and Saskatchewan that are now seen as being more competitive. (11/7, #15)
• Royal Dutch Shell is studying the use of floating liquefied natural gas (LNG) terminals to ship gas produced in Iraq and Egypt, a senior Shell executive said Wednesday. (11/6, #10)
• The $10 barrel oil has reappeared…in Russia. That’s where government policies are slashing prices for local refiners and all but guaranteeing that the country’s extensive reserves of oil are not going to be developed to their fullest. Earlier this week, Russia cut its crude export duty to $39.35/b from just over $50/b. Given that the price of Urals crude is around $60, suppliers were staring at $10 if it was exported, less shipping costs. (11/6, #22)
• Penn State geologist Terry Engelder says the Marcellus shale region of the Appalachians could yield seven times as much natural gas as he earlier estimated (11/5, #18)
• Oil executives and political leaders told a major petroleum conference Monday that the era of cheap energy is over, and warned of another price spike if investment in oil production is curtailed. (11/4, #5)
• U.S. ConocoPhillips is pressing ahead with its $10 billion dollar project to develop a sour gas field in the United Arab Emirates, despite turmoil in global financial markets. (11/4, #8)
• Russian oil production in October rose to its highest in 2008, to 9.86 million bpd, data supplied by Russia’s Energy Ministry showed on Monday. (11/3, #3)