Ecopetrol Builds on Cano Sur Success

- Ecopetrol Builds on Cano Sur Success

Monday, September 12, 2011
Ecopetrol S.A.

Ecopetrol on Monday announced the initial test results of the CSE-8 ST1 exploratory well in the Puerto Gaitan jurisdiction, a municipality in the Meta Province, in areas belonging to the eastern block of the Exploration and Exploitation Cano Sur contract.

Production test to date show a stable average production of 532 barrels per day of API 13.8 grade oil, with water cut around 18.5%.

The exploratory well was designed with a deviated wellbore that allowed contact with a thicker net oil pay and a better location within the deposit. Drilling operations began on August 11, 2011 and reached an average depth of 4,594 feet in 7 days.

This new exploratory success brings to four the number of oil findings in Cano Sur Block during 2011, including Mito-1, Fauno-1 and Pinocho-1. This constitutes an important milestone in the exploration of this block, taking into account its importance for Ecopetrol's heavy crude oil growth strategy.

Results of initial tests show that this well has the highest productivity among the recently drilled wells in this region. Test were undertaken using an artificial lift system with an electric submersible pump.

This contract was signed in June 2005 with the National Hydrocarbon Agency (ANH, Agencia Nacional de Hidrocarburos). Ecopetrol is the sole operator and holder of 100% interests.

"Ecopetrol has identified a huge potential for heavy crude oil commercial production in the Llanos Basin. We are very pleased with this new discovery" said Ecopetrol's CEO Javier Gutierrez Pemberthy.

In the coming months, Ecopetrol will continue to evaluate production conditions and the performance of the deposit found, maintaining simultaneous exploratory efforts in the area of the Cano Sur Block in order to make a prompt commercial viability statement.

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Commodity Corner: Oil Falls as Euro Weakens

- Commodity Corner: Oil Falls as Euro Weakens

Friday, September 09, 2011
Rigzone Staff
by Matthew V. Veazey

Light sweet crude oil for October delivery fell below $86.00 a barrel Friday as the U.S. dollar strengthened against the euro.

The WTI bottomed out at $85.64 a barrel before settling at $87.24, still reflecting a day-on-day loss. It peaked at $89.50. The Brent contract price also ended the day lower, settling at $112.77 after trading within a range from $111.09 to $113.89.

A weaker greenback is bullish for crude oil—priced in dollars—because it becomes a better buy for investors holding other currencies. In the case of the euro Friday, the currency weakened amid mounting fears that Greece will default on its debt. The departure of a high-level German official from the European Central Bank Friday contributed to speculation that euro-zone countries will fail to resolve lingering policy disputes that have hindered efforts to resolve debt crises throughout the region.

Equities fell as the euro-zone uncertainty grew, chilling expectations about global demand for oil. The Dow Jones Industrial Average and S&P 500 each lost approximately 2.7 percent while the Nasdaq lost a relatively modest 2.4 percent. President Obama's latest plan to spur job creation in the U.S., presented Thursday night to a joint session of Congress, failed to brighten the demand outlook.

October natural gas also ended the day lower, falling to $3.915 per thousand cubic feet. Gas futures fluctuated from $3.885 to $3.99 during Friday's floor trading.

Front-month gasoline settled at $2.77 a gallon, slightly higher than the $2.76 intraday low. October gasoline peaked at $2.89 Friday.

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Commodity Corner: Oil Follows Stocks' Lead

- Commodity Corner: Oil Follows Stocks' Lead

Wednesday, September 07, 2011
Rigzone Staff
by Matthew V. Veazey

Thanks to a German court ruling supporting bailouts in the euro-zone, world equities markets posted healthy gains Wednesday. The WTI and Brent crude oil benchmarks followed suit.

Light sweet crude oil for October delivery gained nearly four percent to end the day at $89.34 a barrel. Brent, meanwhile, climbed 2.7 percent to settle at $115.80 a barrel. Buoying stock markets on both sides of the Atlantic as well as Asia was the German Constitutional Court's rejection of an attempt to block German involvement in bailouts of other euro-zone countries.

The Dow Jones Industrial Averaged gained nearly 2.5 percent while the S&P 500 and Nasdaq rose by 2.86 percent and 3.04 percent, respectively. In Europe, the London-based FTSE 100 finished more than 3.1 percent higher and the CAC 40 in Paris gained 3.63 percent. Major exchanges in Shanghai, Tokyo, and Hong Kong posted more modest increases.

The WTI traded within a range from $86.15 to $89.74 while the Brent contract price fluctuated from $112.81 to $115.98.

Natural gas for October delivery managed to break the $4.00 mark, peaking at $4.04 per thousand cubic feet. The midweek momentum faded by the close of floor trading, however, with the front-month contract settling at $3.94 for the second straight day.

October natural gas bottomed out at $3.90 Wednesday.

The price of a gallon of gasoline gained nearly nine cents to settle at just under $2.91, also the intraday high. The price floor during Wednesday's trading was $2.82.

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Commodity Corner: Crude Up on Weather Threat

- Commodity Corner: Crude Up on Weather Threat

Thursday, September 01, 2011
Rigzone Staff
by Saaniya Bangee

Despite shaky equities and a rising dollar, crude futures inched modestly higher Thursday on weather reports of a storm brewing in the Gulf of Mexico.

October oil added 12 cents to its final price tag, settling at $88.93 a barrel on the New York Mercantile Exchange. Oil traded as low as $88.21 a barrel after an earlier intraday peak of $89.90.

The National Hurricane Center reported an 80 percent chance that a tropical wave in the Gulf of Mexico could develop into a tropical cyclone within the next 48 hours. Oil majors such as Shell, ExxonMobil, BP, Anadarko and BP have evacuated nine platforms in the Gulf of Mexico and shut in nearly 80,000 barrels of oil production, according to the Bureau of Ocean Energy Management, Regulation and Enforcement. In addition, 127 million cubic feet per day of natural gas was also shut in.

In other forecasts, initial unemployment claims fell by 12,000 to 409,000 last week. Data reported by the Labor Department helped boost optimism about the economy.

Brent crude, which is used to price many international oil varieties, lost 56 cents to settle lower at $114.29 barrel on fresh concerns over Greece's debt problems. The intraday range for Brent was $113.89 to $115.31 a barrel on the ICE future exchange.

Natural gas for October delivery remained unchanged at $4.05 per thousand cubic feet Thursday.

Gasoline gained 1.64 cents for the first trading session for the October contract. Reformulated gasoline settled at $2.89 a gallon. Some East Coast refineries remain shut down due to Hurricane Irene. Prices fluctuated between $2.85 and $2.92 Thursday.

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Commodity Corner: WTI, Brent Settle Higher

- Commodity Corner: WTI, Brent Settle Higher

Tuesday, August 30, 2011
Rigzone Staff
by Matthew V. Veazey

The WTI and Brent crude oil benchmarks settled higher Tuesday after the Federal Reserve left investors contemplating whether the central bank will try yet again to shore up the sagging U.S. economy.

Light sweet crude oil gained $1.63 to settle at $88.90 a barrel while the Brent picked up $2.14 to end the day at $114.02 a barrel after the Fed released the minutes of the August 9, 2011, joint meeting of the Federal Open Market Committee and the Federal Reserve Board of Governors. The minutes reveal support among some members for more monetary action to spur economic growth.

One possible Fed move, which the central bank has initiated twice since the 2008-2009 financial crisis, is quantitative easing. The approach calls for the Fed's purchase of U.S. Treasury bonds so that banks would have more money available to lend to businesses and consumers.

Both "QE1" and "QE2" yielded a weaker U.S. dollar, which in turn was bullish for crude oil. When the dollar weakens, oil—priced in greenbacks—becomes a better value for investors holding other currencies. The minutes show that the Fed voted to extend its September meeting to two days rather than one, giving it more time to consider the merits of "QE3" and any other options remaining at its disposal.

Also boosting oil was the development of Tropical Storm Katia in the eastern Atlantic Ocean. Located approximately 750 miles west of the Cape Verde Islands late Tuesday, Katia was moving toward the west-northwest at 20 miles per hour. The National Hurricane Center expects the storm to be a major hurricane by Saturday afternoon, when it should be centered to the east of the Lesser Antilles.

During Tuesday's floor trading, the WTI fluctuated from $86.46 to $89.21. The Brent peaked $114.20 and bottomed out at $111.22.

Natural gas for October delivery settled at $3.91 per thousand cubic feet, up a nickel from the final price for the now-expired September contract. October natural gas traded within a range from $3.78 to $3.92.

September gasoline gained nine cents to end the day just under $3.00 a gallon. The futures price fluctuated from $2.897 to $3.00.

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Commodity Corner: Ben, Irene Contribute to Volatility

- Commodity Corner: Ben, Irene Contribute to Volatility

Friday, August 26, 2011
Rigzone Staff
by Matthew V. Veazey

The price of a barrel of light sweet crude oil experienced some volatility Friday before settling at $85.37, or just seven cents day-on-day.

The WTI fell as low as $82.95 after Federal Reserve Chairman Ben Bernanke, speaking at a symposium in Jackson Hole, Wyo., did not announce any Fed plans to launch a third round of quantitative easing. A "QE3" would be bullish for oil and other commodities because it would weaken the U.S. dollar.

Hurricane Irene's pending arrival along the East Coast did create upward momentum for the benchmark, however. The WTI peaked at $85.64 as investors weighed the possible effects the storm may have on refining infrastructure and gasoline supplies in the Mid-Atlantic and Northeast.

The Brent contract price also settled higher Friday, gaining 74 cents to end the day at $111.36 a barrel. It traded within a range from $109.38 to $111.65.

Despite Irene's potential impact on East Coast fuel supplies, reformulated gasoline lost four cents to settle at $2.93 a gallon. The U.S. Coast Guard's lack of a decision during floor trading to close New York Harbor prevented a bullish outcome Friday.

September gasoline peaked at $2.98 and bottomed out at $2.91 during the pre-storm session.

Natural gas for September delivery settled flat at $3.93 per thousand cubic feet. It fluctuated from $3.90 to $3.96.

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Commodity Corner: Brent Falls on Libyan Woes

- Commodity Corner: Brent Falls on Libyan Woes

Monday, August 22, 2011
Rigzone Staff
by Saaniya Bangee

With Libya's six-month conflict nearing an end, crude futures rose 2.3 percent Monday. On Monday, Libyan rebels announced they had taken control of a majority of the country's capital, advancing in efforts to oust leader Moammar Gadhafi.

Light, sweet crude for September delivery gained $1.86 to settle at $84.12 a barrel. Priced traded as low as $81.13 a barrel, after an earlier intraday peak of $84.67. The front-month contract expired at the end of the floor trading session.

Brent, which serves as a barometer for international oil, fell 36 cents on expectations that Libyan oil exports could resume fairly soon. Prior to the civil war, Libya exported 1.3 million barrels a day of high-quality oil. Supply disruptions in Libya and the North Sea have pushed Brent futures past the $100-mark this year. Earlier in the session, Brent futures bottomed out at $105.15 a barrel before settling at $108.26 a barrel.

September natural gas traded 5.1 cents lower at $3.89 per thousand cubic feet Monday on bearish weather forecasts. Forecasts predict a significant drop in temperatures for the upcoming weeks. Higher temperatures boost the demand for natural gas.

In addition, forecasts predict that Hurricane Irene, the first hurricane of this year's Atlantic hurricane season, is unlikely to disrupt vital production areas in the Gulf of Mexico.

The intraday range for natural gas was $3.853 to $3.928 Monday.

Reformulated gasoline blendstock, or RBOB, lost less than a penny Monday to settle at $2.835 a gallon.

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Mexico's Pemex Finds Light Crude in Shallow Gulf Waters

- Mexico's Pemex Finds Light Crude in Shallow Gulf Waters

Monday, August 22, 2011
Dow Jones Newswires
MEXICO CITY
by Laurence Iliff

Mexico's state-owned oil company Petroleos Mexicanos, or Pemex, said Monday that it successfully carried out production tests at new oil field in the southern Gulf of Mexico.

Pemex said the Kinbe-1 well reached an initial average production of 5,600 barrels of light crude per day. The well took more than a year to drill, and was finished Aug. 9. Kinbe-1 also has reached natural gas production of 9 million cubic feet per day on average, the oil monopoly said.

Pemex said "this new discovery increases the petroleum potential of the zone comprised by the fields Tsimin, Xux and Kab" as part of the company's light-crude marine project. Kinbe-1 was drilled in 22 meters of water.

After six years of steady declines in crude-oil production, Pemex is trying to ramp up output in order to break the slide, but has struggled due to declines at the Cantarell offshore fields that once accounted for more than half of the company's total production. Cantarell's decline has brought Pemex's overall production down to just under 2.6 million barrels a day currently from nearly 3.4 million barrels a day in 2004.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Commodity Corner: Oil Ends Week Lower

- Commodity Corner: Oil Ends Week Lower

Friday, August 19, 2011
Rigzone Staff
by Saaniya Bangee

Light, sweet crude posted a slight loss Friday, pressured by yesterday's bearish stock sell-off, as well as a series of negative economic data.

Oil futures ended the week 12 cents lower, settling at $82.26 a barrel Friday and down 3.7 percent for the week. Oil prices traded as low as $79.17 after an earlier intraday peak of $83.55, which was caused by an early rise in the stock market.

Crude gained some support Friday from a weaker dollar. The Dollar Index, which measures the dollar against a basket of major foreign currencies, traded at 74.002 from 74.216. The greenback reached a new post-World War II low against the Japanese yen.

Meanwhile, the September Brent contract price settled $1.63 higher at $108.62 a barrel. The intraday range for Brent was $106.43 to $109.30 a barrel.

Natural gas for September delivery gained nearly 5 cents, or 1.2 percent, to settle at $3.94 per thousand cubic feet. Natural gas fluctuated between $3.90 and $3.97 for the last trading session of the week.

Front-month gasoline advanced 5.80 cents to finish at $2.84 a gallon Friday. RBOB rose for a second straight week.

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Risk Is A Four Letter Word

- Risk Is A Four Letter Word

Thursday, August 18, 2011
Rigzone Staff
by Trey Cowan

The average investor often overlooks the simple concept of how the market discounts risk. Risk and reward typically correlate strongly with one another. Currently, the risk premium that an investor demands in exchange for lending to broader markets is expanding. In broad terms, investors must be anticipating that future risk levels are increasing.

To better define the risk/reward relationship, we first point to the current situation surrounding the 10-Year Treasury Note. From July through the week ending August 12, 2011, the note's yield has declined 26 percent from 3.18 percent to a 2.34 percent. Today, the 10-Year dropped below 2 percent.

Previously, the lowest the yield on the 10-year was 2.12 percent, set in December 2008; when fears regarding the global credit freeze were near their highest levels. Yields for fixed income instruments respond inversely to price. Investors buy the 10-Year to reallocate their holdings away from risk and into this safe-haven, which has the effect of driving the price up. We note the key concept in finance: the yield on a 10-Year is often looked upon as the proxy for the risk-free rate of return.

Another component in the valuation of assets is the risk premium. As the risk-free rate of return shrinks the average risk premium an investor demands must rise. In other words, if the 10-year yield is falling, then market risk is actually on the rise. Let's assume for a moment that an investor wants a 10 percent return on their investment. If the risk free rate has dropped from 3 percent to 2 percent, then the risk premium that investor is willing to take on has grown by a corresponding amount. Otherwise, the investor's required return falls to 9 percent (signifying their aversion to taking on additional risk). Therefore, when we see dramatic drops in the 10-year, like what just took place, all else equal, investment risks must be perceived to be on the rise. Such a move is justified to mathematically keep the overall return at equilibrium.

Using the earnings estimates we can prove that these financial concepts are factoring into current market valuations. For our example we are using the earning's yield of the the S&P 500 Index. We took the recent annual earnings for the S&P 500, $112.8, and divided it by the index value for the week ending August 12, 2011 (1178.81). What we found was that the earnings-to-price (E/P) yield was 9.5 percent. If you subtract the corresponding 10-year treasury yield (i.e. the risk-free rate) of 2.3 percent from the E/P, the remainder is the risk premium for the S&P 500 Index (i.e. 7.2 percent).

The risk premium for the S&P 500 is relevant for two issues. First, the S&P 500 includes only well-capitalized U.S. operated firms of a significant size. If the market expects a total earnings yield of 9.5 percent for blue-chip U.S. firms, then obviously the required return (and associated risk) for lesser quality investments is going to be higher. Second, the current risk premium at 7.3 percent for the S&P 500 is well outside the norm (3.85 percent average since 2005 and 5 percent YTD).

This growing level of inherent risk in the broader markets and the market's appetite for risk does have an impact on oil prices that is worth considering. Although the Fed's posture towards interest rates (and their vow to hold them low into 2013) would suggest that the dollar will remain weak, this is no time to get bullish on oil. Look no further than price variability to understand our reasoning. Since 2005, one standard deviation in the price of a barrel of oil represents 25 percent of the total price. Conversely, one standard deviation in the S&P 500 Index approximates 15 percent of the total. Therefore, at a time when the market is risk averse, an investment in crude oil bears with it 66 percent more risk than the total market.

Suppose that inherent in recent market sentiment is a fear that the U.S. economic growth profile for next year will slip by about 10 percent or approximately three-tenths of one percent of GDP. Ultimately, such a scenario would be accompanied by less demand for oil. We used regression analysis to compute the value of one barrel of oil based on a 10 percent decline in S&P 500 earnings using observations starting in 2005. Our calculations peg the implied value of WTI crude oil at $84/barrel based on if NTM earnings estimates drop $11 for the S&P 500 Index. Our calculations would be well below what the EIA and leading economist recently had considered a reasonable assumption for next year (+$100/bbl).

Also, consider how much the current risk premium exceeds its average 52-week value. Recent history suggests that a growing risk premium (that is well outside this 52-wk norm) spells trouble for oil prices. Back in 2008, risk premium exceeded its own norm by 2 percentage points. Oil prices in the subsequent 10 weeks fell 53 percent. Again in 2010, the S&P 500 risk premium broke 2 percent above its norm and oil prices fell 5 percent in the following ten weeks. With the markets now showing a risk premium that is again 2 percent above the norm, a repeat of this pattern does not seem far-fetched.

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Commodity Corner: Oil Rises on Bullish Gasoline Stocks

- Commodity Corner: Oil Rises on Bullish Gasoline Stocks

Wednesday, August 17, 2011
Rigzone Staff
by Saaniya Bangee

Light, sweet futures held gains of almost 2 percent Wednesday after the EIA reported a sharp decline in U.S. gasoline inventories.

September crude gained nearly a dollar to settle at $87.58 per barrel on the New York Mercantile Exchange. Its European counterpart settled at $110.60 a barrel, up $1.47.

The U.S. Energy Information Administration (EIA) reported a higher than expected drop in gasoline stockpiles, pushing oil prices higher early on in Wednesday's trading session. The EIA said gasoline stockpiles declined by 3.5 million barrels last week to 210.1 million barrels. An increase in gasoline demand suggests refineries require more oil. Meanwhile, the market pared gains when the EIA reported an increase of 4.23 million barrels in oil inventories.

Benchmark West Texas Intermediate traded between $86.65 and $89.00 Wednesday. Brent benchmark peaked at $111.74—the highest since Aug. 4.

In other NYMEX trading, front-month natural gas futures settled at $3.93 per thousand cubic feet after fluctuating between $3.89 and $3.98 Wednesday. Gasoline for September delivery gained 1.65 cents ending the session at $2.89 a gallon. Reformulated gasoline traded as high as $2.93 and as low as $2.86 Wednesday.

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Commodity Corner: Oil Declines on GDP Data

- Commodity Corner: Oil Declines on GDP Data

Tuesday, August 16, 2011
Rigzone Staff
by Matthew V. Veazey

The WTI and Brent contracts settled lower Tuesday after the release of a key European Union economic indicator supported a pessimistic outlook for global crude oil demand.

Light sweet crude oil for September delivery lost $1.23 to end the day at $86.65 a barrel while Brent slipped 44 cents to settle at $109.47 a barrel. Eurostat, the statistical arm of the EU, on Tuesday announced that gross domestic product throughout the bloc rose by only 0.2 percent in the second quarter. GDP growth during the first quarter was a more robust 0.8 percent; however, Eurostat pointed out that the latest second quarter figure beats that of the corresponding period in 2010 by 1.7 percent.

The WTI contract price fluctuated from $85.62 to $87.93 during Tuesday's session.

Front-month natural gas lost nine cents to settle at $3.93 per thousand cubic feet. Forecast models show milder temperatures from the Midwest to the Northeast through the remainder of this month, chilling cooling demand projections for the regions.

The September natural gas contract traded within a range from $3.90 to $4.04 Tuesday.

The price of a gallon of reformulated gasoline fell two cents to end the day at $2.85. September gasoline peaked at $2.87 and bottomed out at $2.83.

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Commodity Corner: Crude Rallies Along with Equities

- Commodity Corner: Crude Rallies Along with Equities

Monday, August 15, 2011
Rigzone Staff
by Matthew V. Veazey

Light sweet crude oil for September delivery gained $2.50 Monday to settle at $87.88 a barrel.

Rallies in equities markets worldwide, coupled with a weaker dollar, propelled oil futures forward. Major merger announcements Monday by heavyweights such as Google and Transocean helped the Dow Jones Industrial Average and S&P 500 to finish the day 1.9 percent and 2.18 percent higher, respectively.

The U.S. Dollar, meanwhile, weakened against other major currencies after a monthly Federal Reserve Bank of New York report showed worsening business conditions in the Empire State. A weaker greenback makes dollar-denominated crude oil a better buy for investors holding other currencies. The New York Fed's survey revealed falling orders, decreasing prices, plunging capital expenditures, and a future general business conditions index hitting its lowest point since February 2009.

The WTI peaked at $88.05 and bottomed out at $84.40. Brent futures settled at $109.91 a barrel, a $1.88 day-on-day gain and four cents shy of Monday's intraday high. The September Brent contract fell to $108.20 earlier in the session.

Thanks in part to milder temperatures in much of the U.S., August natural gas futures lost four cents to settle at $4.02 per thousand cubic feet. The front-month contract price fluctuated from $3.95 to $4.06.

The price of a gallon of reformulated gasoline gained a nickel to end the day at $2.87. August gasoline traded within a range from $2.81 to $2.88.

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Commodity Corner: WTI, Brent Rebound

- Commodity Corner: WTI, Brent Rebound

Wednesday, August 10, 2011
Rigzone Staff
by Matthew V. Veazey

Light sweet crude oil on the New York Mercantile Exchange rebounded Wednesday after the U.S. Department of Energy reported that inventories fell last week, catching investors off-guard.

The September WTI contract price gained $3.59 to settle at $82.89 a barrel. The Energy Information Administration (EIA) announced that commercial crude stocks declined by 5.2 million barrels last week to 349.8 million barrels. The 1.5-percent week-on-week draw starkly contrasted to the prediction of a Platts survey of analysts: a 1.8 million-barrel build for the period.

Brent futures also surged Wednesday, settling $4.11 higher at $106.68 a barrel. The WTI traded within a range from $79.53 to $82.90. The contract price for Brent fluctuated from $103.47 to $106.55.

EIA also reported Wednesday that reformulated gasoline inventories declined by a larger-than-expected volume last week: 1.6 million barrels. The 213.6 million barrel EIA figure for the week ending August 5, 2011, was 400,000 barrels below what a Platts survey of analysts had projected.

Front-month gasoline gained 11 cents to end the day at $2.78 a gallon. The September contract price peaked at $2.79 and bottomed out at $2.68.

Natural gas for September delivery edged upward by less than a penny to settle at $4.00 per thousand cubic feet. The contract price fluctuated from $3.98 to $4.08.

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Commodity Corner: Crude Slips Below $80

- Commodity Corner: Crude Slips Below $80

Tuesday, August 09, 2011
Rigzone Staff
by Saaniya Bangee

Crude oil futures extended losses Tuesday after the Federal Reserve said risks to the economic outlook have increased.

Light, sweet crude continued to retreat on the New York Mercantile Exchange Tuesday settling at $79.30 a barrel, down $2.01. For the first time in nearly 10 months, crude prices settled below $80 a barrel.

The Fed failed to ease fears as Chairman Ben S. Bernanke and his colleagues promised to extend the benchmark interest rate for another two years but stopped short of initiating an additional round of economic stimulus.

In separate monthly reports, the U.S. Energy Information Administration (EIA) and OPEC cut demand forecasts for 2011. The EIA cut its 2011 world demand growth forecast by 60,000 barrels per day (bpd). It raised its 2012 projections to 1.64 MMbpd. Meanwhile, OPEC cut oil demand growth for this year by 150,000 bpd and 20,000 bpd for next year.

The intraday range for crude was $75.71 to $83.05 a barrel.

At its lowest close since Feb. 18, Brent futures lost $1.17 to end Tuesday's trading session at $102.57 a barrel. Prices traded as low as $99.06 and as high as $105.81 Tuesday.

Gasoline for September delivery settled 2.4 cents lower at $2.67 a gallon Tuesday. The EIA reported a 2 percent decline in gasoline demand over the summer-driving season, pushing prices as low as $2.59. The intraday high for gasoline was $2.76.

Conversely, natural gas futures gained 5.9 cents, or 1.5 percent, settling at $3.99 per thousand cubic feet. Natural gas futures pushed past the $4-mark Tuesday, peaking at $4.04 and bottoming out just below $3.89. High temperatures continue to support gains.

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Commodity Corner: WTI, Brent Futures Plummet

- Commodity Corner: WTI, Brent Futures Plummet

Monday, August 08, 2011
Rigzone Staff
by Matthew V. Veazey

On the first trading day after Standard & Poor's downgraded the United States' long-term credit rating from AAA to AA+, the WTI settled at its lowest point in nearly nine months.

Light sweet crude oil lost $5.57 to end the day at $81.31 a barrel—just six cents higher than the Nov. 23, 2010, settlement price. Concerns that the U.S. is slipping into a double-dip recession have dampened expectations about oil demand. Equity markets also sustained significant losses Monday. The Dow Jones Industrial Average fell 5.55 percent while the S&P 500 declined nearly 6.7 percent.

The Brent futures price also plunged Monday but to a somewhat more modest degree than the WTI. It ended the day at $103.47, marking a $5.63 decline from Friday.

The WTI peaked at $85.73 and bottomed out at $80.17 while the Brent traded within a range from $102.88 to $106.92.

Also reflecting fears about slumping demand was the price of gasoline for September delivery, which lost 4.1 percent to end the day at $2.69 a gallon. Front-month gasoline traded within a range from $2.80 to $2.67 Monday.

September natural gas remained relatively steady Monday, losing less than one cent to settle at $3.935 per thousand cubic feet. Natural gas peaked at $3.97 and bottomed out at $3.855.

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Commodity Corner: Oil Takes a Wild Ride

- Commodity Corner: Oil Takes a Wild Ride

Friday, August 05, 2011
Rigzone Staff
by Matthew V. Veazey

After settling at its lowest point in six months Thursday, light sweet crude oil for September delivery managed to eke out a small gain for the day.

The WTI settled at $86.88 a barrel, representing a 25-cent day-on-day increase, after a volatile trading session. The benchmark plunged to an intraday low of $82.87 on escalating debt crisis fears within the eurozone.

Italy is the latest EU country to risk defaulting on its massive public debt. Making debt service less manageable is Italy's stagnant economic growth rate. A possible Italian bailout, along with other debt restructuring initiatives elsewhere in the eurozone, has caused the region's currency to lose value; in this situation, dollar-denominated crude oil becomes a less attractive buy for investors holding the euro.

Investor sentiment brightened later Friday, however, amid reports that Italy's government plans to take steps to jump-start economic growth. The economic liberalization program reportedly includes measures such as amending the country's constitution to require a balanced budget, loosening certain employment rules, and accelerating the pace of entitlement reform.

Also giving oil a boost Friday was a U.S. Labor Department report stating that non-farm payrolls increased by 117,000 last month, beating economists' expectations. Also, the agency announced that the official unemployment rate edged downward in July by 0.1 percentage point to 9.1 percent.

The WTI peaked at $86.88 Friday. The September Brent contract price gained $2.12 to end the day at $109.37 a barrel. It fluctuated from $105.69 to $109.90.

Natural gas for September delivery ended the day flat at $3.94 per thousand cubic feet. It traded within a range from $3.90 to $3.98.

September gasoline climbed nearly seven cents to end the day at $2.805 a gallon. The front-month contract peaked at $2.82 and bottomed out at $2.68.

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Commodity Corner: Crude Dives to 6-Month Low

- Commodity Corner: Crude Dives to 6-Month Low

Thursday, August 04, 2011
Rigzone Staff
by Saaniya Bangee

Crude oil futures plunged nearly 6 percent Thursday to its lowest settlement since February. Prices pushed lower $5.30, marking the largest one-day drop since May 5, as equity markets sold off.

Light, sweet crude settled at $86.63 a barrel on the New York Mercantile Exchange (NYMEX), down for the fifth consecutive session. Its counterpart settled at $107.25 a barrel amid Europe's sovereign debt crisis. Brent crude traded within a range of $107.05 and $113.60 Thursday.

Largely steered by growing concern that the U.S. economy is experiencing a double-dip recession, equity markets sold-off sharply mid-day Thursday pushing prices further. In addition, the greenback gained against the euro Thursday as the Dollar Index rose by almost 1.5 percent. As the greenback rises, the dollar-denominated commodities becomes expensive for foreign buyers.

Likewise, natural gas futures also tumbled Thursday falling below the $4-mark for the first time since March. Front-month natural gas lost nearly 15 cents to settle at $3.94 per thousand cubic feet. The Energy Information Administration said U.S. natural gas inventory increased by 44 billion cubic feet for the week ended July 29.

Meanwhile, moderate temperature forecasts didn't give the market much support either. Also, the National Hurricane Center reported that Tropical Storm Emily isn't headed toward the Gulf of Mexico.

The intraday range for natural gas was $3.915 to $4.119 per thousand cubic feet.

Gasoline for September delivery dropped 19.41 cents, or 6.6 percent, to end Thursday's trading session at $2.74 a gallon, having traded as low as $2.728 after an earlier intraday peak of $2.94.

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Commodity Corner: Mfg. Data Stoke Oil Demand Fears

- Commodity Corner: Mfg. Data Stoke Oil Demand Fears

Monday, August 01, 2011
Rigzone Staff
by Matthew V. Veazey

The September contract price for light sweet crude oil settled at $94.89 a barrel Monday. The WTI traded within a range from $93.42 to $98.60.

The 81-cent day-on-day loss followed the release of disappointing July manufacturing figures by the Institute of Supply Management (ISM). ISM, which bases its findings on surveys of manufacturing supply managers, reported that the U.S. manufacturing sector expanded at a slower rate in July. The organization's closely monitored Purchasing Manager's Index (PMI) fell from 55.3 to 50.9 from June to July; a value above 50 generally means that the manufacturing sector is expanding.

"Production and employment also showed continued growth in July, but at slower rates than in June," ISM Manufacturing Business Survey Committee Chair Bradley J. Holcomb said in written statement. "The New Orders Index registered 49.2 percent, indicating contraction for the first time since June of 2009, when it registered 48.9 percent." Holcomb also pointed out that export sales were very strong and domestic sales were sluggish last month.

Brent futures edged upward Monday, gaining seven cents to settle at $116.81 a barrel. The Brent contract price peaked at $119.95 and bottomed out at $114.86.

Weather forecast models are projecting above-normal temperatures throughout the eastern half of the U.S. through the middle of next week, and cooling demand is expected to increase as a result. September natural gas gained 4.3 cents to end the day at $4.19 per thousand cubic feet.

A new weather system in the Caribbean could also have an effect on natural gas prices over the next several days. The National Hurricane Center in Miami reported Monday afternoon that a "vigorous" tropical wave has formed near the Lesser Antilles and will likely to develop into a tropical cyclone by the middle of the week. The system, which was moving west-northwestward at 15 to 20 miles per hour at 2 p.m. EDT Monday, would be named Emily if it strengthens into a tropical storm.

September natural gas traded within a range from $4.13 to $4.20 Monday.

Gasoline for September delivery lost a penny Monday to settle at $3.05 a gallon after fluctuating from just under $3.01 to $3.145. The August contract, which expired Friday, settled at $3.11.

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Report: UK O&G Production Declines Continue

- Report: UK O&G Production Declines Continue

Monday, August 01, 2011
Rigzone Staff
by Karen Boman

UK oil and natural gas production declined in 2010, mirroring the larger trend seen over the past decade, the UK Department of Energy and Climate Change (DECC) reports.

In the Digest of United Kingdom Energy Statistics (DUKES) 2011 report, DECC reports that primary energy production in 2010 totaled 158.1 million tones of oil equivalent, down 5.3 percent from 2009. Production has fallen each year since 1999, and is down 46.9 percent on 1999 levels, an average rate of decline of 5.6 percent.

Crude oil production, which includes natural gas liquids (NGLs), in 2010 was 63 million tones, 7.7 percent lower than in 2009, and now accounts for 44 percent of primary energy production.

DECC notes that net imports of crude oil and NGLs rose to meet demand with oil exports decreasing by six percent. Net imports grew to just under 9 million tones or around 13 percent of the UK's demand.

The decrease in oil production over the past 10 years shows a sharp rate of decline between 2002 and 2006, with a shallower profile in later years. The main factor behind this flattening effect was the Buzzard field development, which compensated for the sharper falls seen in existing fields. On average, crude oil production has been decreasing by around seven percent a year.

Gross UK gas production has been decreasing since 2000, and in 2010 was down 4.3 percent from 2009. Gross gas production has fallen by 47.3 percent since its peak in 2000. Gas imports in 2010 were almost a third higher than in 2009, mainly because of lower production and higher demand.

Liquefied natural gas (LNG) is increasingly important as a source of imports to supplement existing ones. In September 2010, imports from shipped LNG surpassed the gas imported via pipeline from Norway for the first time; in 2010, LNG imports accounted for 35 percent of the UK's total commercial imports.

UK primary energy consumption in 2010 grew by 3.2 percent, largely driven by the colder weather in 2010. Total oil consumption in the UK fell marginally in 2010; the majority of final consumption of oil, around 75 percent, was consumed in the transport sector. Energy use for transport fell by one percent in 2010 compared to 2009, largely due to falls in aviation fuel resulting from disruptions due to snow and volcanoes.

Overall gas demand grew by 8.4 percent in 2010, with gas demand for electricity generation growing by 3.5 percent; gas's share of the UK's supply of electricity was 47 percent.

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