Energy and Markets Newsletter 092011

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September20, 2011

Energy Data Highlights

Retail gasoline price9/19/2011: $3.601/galdown$0.060 from week earlierup$0.878 from year earlier

Retail diesel price9/19/2011: $3.833/galdown$0.029 from week earlierup$0.873 from year earlier

Crude oil futures price9/16/2011: $87.96/bblup$0.72 from week earlierup$13.39 from year earlier

Natural gas futures price9/16/2011: $3.809/mmBtu

down$0.106 from week earlierdown$0.251 from year earlier

Weekly coal production9/10/2011: 20.694 million tonsdown0.292 million tons from week earlierdown0.380 million tons from year earlier

http://www.eia.gov/

Natural Gas/ Power News

EIA Storage Release 9/1/11 (Actual): +87 Bcf Previous Week: +64 Bcf -4.3% Change from 1 Year Ago-1.6% Change 5-year Average

Natural gas key to US energy security: former President Carter The USlikely will not generate a large portion of its power from green energy any timesoon, but the country's abundant natural gas reserves could provide a new pathtoward achieving energy security, former President Jimmy Carter said in a wide-ranging interview on the Platts Energy Week TV program, which aired on Sunday.http://www.platts.com/RSSFeedDetailedNews/RSSFeed/ElectricPower/6490472

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Iraqi factions wrangle over gas reservesFor other analysts, the price that Mr Shahristani negotiated is simply the onenecessary to attract an international oil company to develop a large project in acountry where security remains fragile at best. The price that Shell is due toreceive under the terms of the agreement is related to the oil price. Mr Dargin

estimates that if the Brent oil price is approximately $100, the Iraqi side will payslightly above $4 per million British thermal units (mmbtu) for the gas, while beingforced to sell it domestically at a fixed price of $1.04/mmbtu. "Overall, it iscompetitive with current US gas prices and illustrates that Middle Easterncountries, even if they drive a hard bargain, may not be able to entice investmentin any other way in the natural gas sector," says Mr Dargin.http://www.zawya.com/story.cfm/sid20110919_6118_221/Wrangling_over_gas_reserves

Canadian gas exports up 10.2% in July on waning hydro levels: NEBCanadian natural gas exports to the US rose 10.2% from June to July to around255.7 million cubic meters/d, according to statistics released by the NationalEnergy Board on Monday. The largest gain in exports was seen at the Monchypoint in Sasketchawan, which allows gas to flow mainly to the US Pacific Northwestand down to the West Coast.http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/6494140

Ukraine to use gas pipelines to send shale gas to Europe: BoykoUkraine will use its natural gas pipeline to start exports of shale gas and methaneto the European Union within the next seven to 10 years, Energy and Coal IndustryMinister Yuriy Boyko said. His comments, in a weekend interview with Intertelevision, contrasted with earlier remarks from Prime Minister Mykola Azarov whosuggested Ukraine may be forced to dismantle its gas pipelines if Russia keepsbuilding Europe-bound pipelines bypassing Ukraine. "Such a radical scenario isnot threatening us because we expect to fill the pipeline with our own gas," Boyko

said.http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/8354870

European Natural-Gas Trading Rose 29% Last Year, Prospex Consultant SaysNatural-gas trading volumes climbed last year in Europe , driven by a jump inGermany and the Netherlands as consumption recovered and imports of liquefiednatural gas rose, Prospex Research Ltd. said.http://www.bloomberg.com/news/2011-09-20/european-natural-gas-trading-rose-29-last-year-prospex-says.html

LNG Surges as Japan Vies With China, Exxon’s Shipments Grow

Liquefied natural gas prices are surging to a three-year high as demand from Japan , China and India outpaces supply increases, boosting sales for producersfrom BG Group Plc (BG/) to Exxon Mobil Corp. (XOM) http://www.bloomberg.com/news/2011-09-19/lng-price-boom-seen-as-japan-vies-with-china-while-exxon-s-shipments-grow.html

Philippines likely to begin importing LNG commercially from 2015Commercial LNG importing in the Philippines could start four to five years fromnow, with Luzon likely to be developed as a hub, Jose M Layug Jr, Undersecretaryof the Department of Energy of Philippines, said Tuesday. Currently, there is a

natural gas masterplan, which is determining which areas in the country would be

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appropriate for constructing an LNG receiving terminal, pipelines and also afloating LNG vessel.http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/8360476

Green/ Alternative Energy News

Statoil donates $5 million to Univ. of Texas for energy researchStatoil will give $5 million over five years to the University of Texas atAustin to fund research in geology, petroleum engineering and otherareas of interest for the Norwegian oil company as it grows its footholdin North America.The agreement is the biggest of its kind outsideNorway for Statoil, which is two-thirds owned by the Norwegiangovernment, and the donation builds on a relationship that the twoinstitutions have had for many years, Statoil said.http://fuelfix.com/blog/2011/09/19/statoil-donates-5-million-to-univ-of-texas-for-energy-research/

Crude Oil News

OPEC Daily Basket Price 9/19/2011 – $108.68(9/16/2011 – $110.69) Recent Rig Counts

AreaLast

CountCount

Changefrom Prior

Count

Date of Prior

Count

Changefrom Last

Year

Date of Last Year's

Count

U.S. 16 Sept

11

1985 27 9 Sept 11 +324 16 Sept 10

Canada 16 Sept11

502 -13 9 Sept 11 +169 16 Sept 10

International

August2011

1183 +33 July 2011 +81 August 2010

http://investor.shareholder.com/bhi/rig_counts/rc_index.cfmCrude Oil Recovers in New York as Equities Advance, Euro Pares LossesCrude oil rose for the first time in three days in New York as the euro pared lossesagainst the dollar and European equity markets advanced, easing concern that

the region’s debt crisis is damping demand for fuel. Futures gained as much as 1.1percent, halting a slide of more than 4 percent in the previous two trading days,as the Stoxx Europe 600 index advanced 1 percent. Oil earlier fell as much as 0.7percent following a downgrade in Italy’s credit rating by Standard & Poor’s.http://www.bloomberg.com/news/2011-09-20/crude-oil-futures-recover-in-new-york-as-euro-pares-losses-against-dollar.html

Oil bounces from sell-off on Europe economic woeBrent rose on Tuesday, recouping from heavy losses as worries overglobal economy were seen factored into current prices.The gain in oilprices was limited, however, by economic run cuts in Europeanrefineries, which offset support from output problems at key North Sea

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oilfields.http://www.reuters.com/article/2011/09/20/us-markets-oil-idUSTRE77838320110920

Gasoline prices remain far above 2010 levelsRetail gasoline prices are falling, but at rates that are difficult to notice, especiallyin California. Perhaps even worse for consumers during a weak economicrecovery, the pump pain remains locked in far above the cost of filling up a tank ayear ago. http://latimesblogs.latimes.com/money_co/2011/09/gasoline-prices-remain-far-above-2010-levels.html

Hedge Funds Raise Oil Wagers Most Since March: Energy MarketsHedge funds raised bullish bets on oil by the most since March as a tropical stormcurtailed production in the Gulf of Mexico.http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/09/19/bloomberg_articlesLRS0EP6K50YD.DTL#ixzz1YQdWco12

ICE looks at new Brent oil contract amid pricing movesICE Futures Europe, the exchange home of the Brent oil benchmark, is mulling thelaunch of a parallel Brent contract to prevent a disconnect between thederivatives and physical markets ahead of a change in the way oil prices arecalculated. Platts, the pricing agency which acts as the de facto regulator of theBrent physical market, announced last week that it would overhaul the formula ituses to estimate the cost of the oil benchmark from January next year.http://www.ft.com/intl/cms/s/0/39136d20-e2d9-11e0-93d9-00144feabdc0.html#axzz1YUSlSgCa

Supply-side support keeps Brent over $100

Oil demand growth is weakening fast as global economic growth slows down, sowhy does Brent crude oil trade persistently above $100 a barrel? The answer lieson the supply side – non-Opec production growth is weakening fast too.http://www.ft.com/intl/cms/s/0/3605df74-e355-11e0-8f47-00144feabdc0.html?ftcamp=rss#axzz1YUSlSgCa

$44 million settles Cosco Busan oil spill in bay The shipping companies responsible for the 2007 Cosco Busan oil spill, whichpolluted San Francisco Bay and killed thousands of birds and fish, have agreed topay $44.4 million to restore habitat and reimburse the agencies that responded tothe disaster, state and federal officials announced Monday.

http://fuelfix.com/blog/2011/09/20/44-million-settles-cosco-busan-oil-spill-in-bay/ConocoPhillips establishes second Chinese spill fund ConocoPhillips said its board of directors has approved a second fund to deal withcosts arising from offshore spills at two of the company’s oil platforms in China’sBohai Bay earlier this summer. The Houston oil giant said the fund will specificallyaddress environmental issues in the offshore area, and it is working with the ChinaNational Offshore Oil Corporation (CNOOC), its co-venturer in the Peng Lai 19-3field, and other parties to assess the spills’ impact. The move comes afterConocoPhillips said on Sept. 6 that it would establish a separate fund to pay fordamages related to the spills.

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http://fuelfix.com/blog/2011/09/19/conocophillips-establishes-second-chinese-spill-fund/

Petrobras passes first post-Macondo test of deepwater containment US regulators said Monday that Petrobras America passed a surprise drill to proveits ability to respond to a hypothetical blowout at one of its deepwater wells in the

Gulf of Mexico. The Bureau of Ocean Energy Management, Regulation andEnforcement said last week's unannounced table-top exercise tested Petrobras'response to an imaginary loss of well control. It had to show that it could quicklynotify state and federal authorities and deploy contractors to contain the blowout.It was the first drill of the sort since BP's Macondo disaster last year. The CoastGuard and Louisiana emergency officials also participated.http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/6494138

OPEC’s $1 Trillion Cash Quiets Poor on Longest Ever $100 Oil Saudi Arabia will spend $43 billion on its poorer citizens and religious institutions.Kuwaitis are getting free food for a year. Civil servants in Algeria received a 34

percent pay rise. Desert cities in the United Arab Emirates may soon enjoyuninterrupted electricityhttp://www.bloomberg.com/news/2011-09-19/opec-s-1t-cash-quiets-poor-on-longest-ever-100-oil.html

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GKP raises $200m to fund Kurdistan explorationGulf Keystone Petroleum, the Aim-quoted oil explorer, has raised $200m through ashare placement to appraise the amount of oil in its concessions in Kurdistan,northern Iraq...GKP estimates its Kurdistan assets could contain 12bn barrels of oilin total.http://www.ft.com/intl/cms/s/0/b97839c2-e35c-11e0-8f47-00144feabdc0.html?

ftcamp=rss#axzz1YUSlSgCa Lost in the sands

The effort to revive Libya’s oil industry will have global consequences...Therevolution has delivered a big setback for the country’s oil industry. It will takemonths, if not years, to recover to pre-war levels. But in the medium term, the endof the Gaddafi regime also provides an opportunity. In 1969, the year Gaddafigained power, Libya produced nearly as much as Saudi Arabia – 3.1m b/d and3.3m b/d, respectively – a clear sign of its potential.http://www.ft.com/intl/cms/s/0/5674bcb0-e2b7-11e0-897a-00144feabdc0.html#axzz1YUSlSgCa

China and India account for half of global energy growth through 2035Strong economic growth leads China and India to more than double theircombined energy demand by 2035, accounting for one-half of the world's energygrowth according to EIA's recently released International Energy Outlook 2011(IEO2011)http://www.eia.gov/todayinenergy/detail.cfm?id=3130

Weather 6 to 10 Day OutlooksTemperature

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Precipitation

8 to 14 day Outlooks

Temperature

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Precipitation

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