Official: Oil spill hasn’t reached Great Salt Lake

June 13, 2010

Emergency workers don’t believe 21,000-gallon oil spill has reached Great Salt Lake

Brock Vergakis, Associated Press Writer, On Sunday June 13, 2010, 6:36 pm EDT

SALT LAKE CITY (AP) — Emergency workers believe they have stopped a 21,000-gallon oil leak from reaching the environmentally sensitive Great Salt Lake, one of the West’s most important inland water bodies for migratory birds that use it as a place to rest, eat and breed.

But the spill has taken a toll on wildlife at area creeks and ponds, coating about 300 birds with oil and possibly threatening an endangered fish.

The leak began Friday night when an underground Chevron Corp. pipeline in the mountains near the University of Utah broke. The breach sent oil into a creek that flows through neighborhoods, into a popular Salt Lake City park, and ultimately into the Jordan River, which flows into the Great Salt Lake.

The 10-inch pipeline was shut off Saturday morning, when workers at a nearby Veterans Administration building smelled oil and called the Salt Lake City fire department, which notified Chevron. The pipe carries crude oil from western Colorado to a refinery near the Salt Lake City International Airport.

Jason Olsen, spokesman for the Salt Lake City Joint Information Center, said Sunday emergency workers believe they have contained the spill to the Jordan River.

But the spill still took its toll on birds at Red Butte Creek and at a large pond at Liberty Park, where visitors often feed birds from the shore and on rented paddle boats. About 300 birds were coated in oil and cleaned at Utah’s Hogle Zoo. Fewer than 10 have died, said Salt Lake City spokeswoman Lisa Harrison-Smith.

Most of the birds were Canada geese, although some ducks were also covered.

Harrison-Smith said the oil also flowed through several other riparian areas, which could threaten a rare Utah fish called a June sucker. It’s been listed as an endangered species since 1986.

Read the rest of this entry »


Florida Skips Offshore Oil Binge but Still Pays

June 12, 2010

By DAMIEN CAVE

KEY LARGO, Fla. — When rigs first started drilling for oil off Louisiana’s coast in the 1940s, Floridians scanned their shoreline, with its resorts and talcum-white beaches, and said, No thanks. Go ahead and drill, they told other Gulf Coast states; we’ll stick with tourism.

Now that invisible wall separating Florida from its neighbors has been breached. The spreading BP oil spill has already reached the Panhandle, and if it rides currents to the renowned reefs and fishing holes on both Florida coasts, the Sunshine State could become a vacation destination with the rules of a museum: Look, but don’t touch.

All because other states decided to rely on oil and gas, angry Floridians say; all because, in the water, there are no borders — only currents that can carry catastrophes hundreds of miles.

“There’s nothing we can do,” said Mike McLaughlin, 42, while stretching tanned shark skin on a dock here in the Keys. “We’re just sitting here, waiting for it all to disappear.”

Many Floridians, of course, say they are heartbroken for Louisiana, and they still reserve their most caustic criticism for BP and government regulators.

But with oil continuing to gush from a well off Louisiana, Florida has grown angrier at its oil-friendly neighbors. Gov. Charlie Crist said in an interview last week that “there’s a certain level of frustration” with the fact that Florida gets little if any financial benefit from offshore drilling, even though it shares the environmental risks.

On docks and beaches, many Floridians are less measured, and compare Louisiana to a neighbor with a bonfire that has set their block ablaze.

To some extent, it is a conflict set up by history. Louisiana and Florida may share the Gulf of Mexico, but they are essentially oil opposites.

Ever since World War II, when tar balls washed ashore across the gulf after German U-boats sank Allied oil tankers, Florida officials have held drilling at bay with state laws and lobbying in Washington to protect their state’s bustling tourism industry.

Louisiana, meanwhile, is an oil state through and through that discovered its first commercial deposits in 1901 and started drilling offshore in 1947.

State officials have never looked back, and the resulting divide between the two states is now economic as well as cultural: oil and gas contribute about $65 billion a year to the Louisiana economy, according to the state’s oil and gas association, while in Florida, tourism accounts for about $60 billion.

Read the rest of this entry »


Gold hits record near $1,150/oz as dollar slips

November 18, 2009

Wed Nov 18, 2009 5:13am EST

By Jan Harvey

LONDON (Reuters) – Gold hit a fresh record high near $1,150 an ounce on Wednesday, boosting precious metals across the board, as a dip in the dollar index added to momentum buying as prices broke through key technical resistance levels.

In non-U.S. dollar terms, gold also climbed, hitting multi-month highs when priced in the euro, sterling and the Australian dollar.

Spot gold hit a high of $1,147.45 and was at $1,146.05 an ounce at 0948 GMT, against $1,141.50 late in New York on Tuesday.

U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange also hit a record $1,148.10 and were later up $7.10 at $1,146.40 an ounce.

“Yesterday the market took a breather and tested below $1,130 very quickly, (but) a few physical related bargain hunters were lined up to grab the dip,” said Afshin Nabavi, head of trading at MKS Finance in Geneva.

The market is being underpinned by fresh interest in gold from the official sector, he said, after a recent major bullion acquisition from India and smaller buys by the central banks of Mauritius and Sri Lanka.

The acquisitions underlined gold’s appeal as a portfolio diversifier, especially in an environment where further dollar weakness was expected, analysts said.

The dollar eased back on Wednesday from its biggest rise in three weeks in the previous session, as traders awaited U.S. inflation data due at 1330 GMT.

The dollar index, which measures the U.S. currency’s performance against a basket of six others, was down 0.37 percent, while the euro/dollar exchange rate firmed.

Other commodities also climbed, with oil rising back toward $80 a barrel and copper to 13-1/3 month highs near $7,000 a tonne. Both are being lifted by the weak dollar.

Read the rest of this entry »


Water worries threaten U.S. push for natural gas

October 1, 2009

Thu Oct 1, 2009 8:26am EDT

By Jon Hurdle

PAVILLION, Wyoming (Reuters) – Louis Meeks, a burly 59-year-old alfalfa farmer, fills a metal trough with water from his well and watches an oily sheen form on the surface which gives off a faint odor of paint.

He points to small bubbles that appear in the water, and a thin ring of foam around the edge.

Meeks is convinced that energy companies drilling for natural gas in this central Wyoming farming community have poisoned his water and ruined his health.

A recent report by the Environmental Protection Agency suggests he just might have a case — and that the multi-billion dollar industry may have a problem on its hands. EPA tests found his well contained what it termed 14 “contaminants of concern.”

It tested 39 wells in the Pavillion area this year, and said in August that 11 were contaminated. The agency did not identify the cause but said gas drilling was a possibility.

What’s happened to the water supply in Pavillion could have repercussions for the nation’s energy policies. As a clean-burning fuel with giant reserves in the United States, natural gas is central to plans for reducing U.S. dependence on foreign oil.

But aggressive development is drawing new scrutiny from residents who live near gas fields, even in energy-intensive states such as Wyoming, where one in five jobs are linked to the oil and gas industry which contributed more than $15 billion the state economy in 2007.

People living near gas drilling facilities in states including Pennsylvania, Colorado, New Mexico and Wyoming have complained that their water has turned cloudy, foul-smelling, or even black as a result of chemicals used in a drilling technique called hydraulic fracturing, or “fracking.”

The industry contends drilling chemicals are heavily diluted and injected safely into gas reservoirs thousands of feet beneath aquifers, so they will never seep into drinking water supplies.

“There has never been a documented case of fracking that’s contaminated wells or groundwater,” said Randy Teeuwen, a spokesman for EnCana Corp (ECA), Canada’s second-largest energy company, which operates 248 wells in the Pavillion and nearby Muddy Ridge fields.

Read the rest of this entry »


CFTC moves to rein in small ETF investors: report

August 22, 2009

Sat Aug 22, 2009 12:18pm EDT

CHICAGO (Reuters) – Exchange-traded funds or ETFs have become a top target in U.S. regulators’ efforts to rein in excessive speculation in oil and other commodity markets, The Wall Street Journal reported on Saturday.

Commodity ETFs, which came into existence in 2003, offer one of the few avenues for small investors to gain direct exposure to commodity markets. The funds pool money from investors to make one-way bets, usually on rising prices.

Some say this causes excessive buying that artificially inflates prices for oil, natural gas and gold.

Commodity ETFs have ballooned to hold $59.3 billion in assets as of July, according to the National Stock Exchange, which tracks ETF data.

The Commodity Futures Trading Commission has said it seeks to protect end users of commodities, and that cutting out individual investors is not the goal.

“The Commission has never said, ‘You aren’t tall enough to ride,'” CFTC Commissioner Bart Chilton was quoted as saying in the WSJ article. “I don’t want to limit liquidity, but above all else, I want to ensure that prices for consumers are fair and that there is no manipulation — intentional or otherwise.”

Limiting the size of ETFs will result in higher costs for investors, the WSJ reported, because legal and operational costs have to be spread out over a fewer number of shares. Investors range from individuals to banks and hedge funds with multimillion-dollar positions.

The CFTC is currently considering a host of measures to curb excessive speculation, including position limits in U.S. futures markets. Many U.S. lawmakers called for greater regulation of some commodity markets after a price surge last year sent crude oil to a record high of $147 a barrel in July 2008.

(Reporting by Matthew Lewis; Editing by Toni Reinhold)


In sign of strength, S&P 500 breaks past 1,000 as Wall Street rally blows into August

August 3, 2009

By Sara Lepro and Tim Paradis, AP Business Writers
Monday August 3, 2009, 6:02 pm EDT

NEW YORK (AP) — The Standard & Poor’s 500 index (SPX) is four digits again now that the stock market’s rally has blown into August.

The widely followed stock market measure broke above 1,000 on Monday for the first time in nine months as reports on manufacturing, construction and banking sent investors more signals that the economy is gathering strength. The S&P is used as a benchmark by professional investors, and it’s also the foundation for mutual funds in many individual 401(k) accounts.

Wall Street’s big indexes all rose more than 1 percent, including the Dow Jones industrial average (INDU), which climbed 115 points.

The market extended its summer rally on the type of news that might have seemed unthinkable when stocks cratered to 12-year lows in early March. A trade group predicted U.S. manufacturing activity will grow next month, the government said construction spending rose in June and Ford Motor Co. (F) said its sales rose last month for the first time in nearly two years.

“The market is beginning to smell economic recovery,” said Howard Ward, portfolio manager of GAMCO Growth Fund. “It may be too early to declare victory, but we are well on our way.”

The day’s reports were the latest indications that the recession that began in December 2007 could be retreating. Better corporate earnings reports and economic data propelled the Dow Jones industrial average 725 points in July to its best month in nearly seven years and restarted spring rally that had stalled in June.

On Monday, a report from the Institute for Supply Management, a trade group of purchasing executives, signaled U.S. manufacturing activity should increase next month for the first time since January 2008 as industrial companies restock shelves. Also, the Commerce Department said construction spending rose rather than fell in June as analysts had expected. The reports and rising commodity prices lifted energy and material stocks.

Ford said sales of light vehicles rose 1.6 percent in July. Other major automakers said they saw signs of stability in sales. Investors predicted that the government’s popular cash for clunkers program would boost overall auto sales to their highest level of the year.

Read the rest of this entry »


Arch Coal Attracts Soros as Peabody Lures Citadel

November 24, 2008

By Arijit Ghosh and Christopher Martin

Nov. 24 (Bloomberg) — Billionaire investor George Soros, Citadel Investment Group LLC and T. Rowe Price Group Inc. are snapping up coal mining shares, taking advantage of the cheapest valuations in five years as demand for electricity rises.

Soros bought 2.9 million Arch Coal Inc. (ACI) shares last quarter for a 2 percent stake in the second-largest U.S. coal producer, filings with the Securities and Exchange Commission show. Citadel, the Chicago-based hedge fund, and Invesco Ltd. in Atlanta bought 3.5 million shares of Peabody Energy Corp. (BTU), the biggest miner. T. Rowe reported purchasing stock in Peabody, Arch, Consol Energy Inc. (CNX) and Indonesia’s PT Bumi Resources.

While coal, the cheapest fuel for power, is up 88 percent in Pennsylvania, shares of the companies that mine the mineral have slumped along with the rest of the commodities industry. Now, investors are betting that Peabody, which traded at 3.7 times projected 2009 earnings as of Nov. 21, and Arch at 2.5 times are cheap because coal use will increase. The valuations were at more than a 54 percent discount to the MSCI World/Energy Index.

“Coal is the best commodity to get into right now,” said Daniel Rice, manager of BlackRock Advisors Inc.’s $1.5 billion Global Resources Fund in Boston, which is among the largest holders of Peabody and Arch. “It’s a lot less sensitive to downturns because it’s needed for basic power generation, and demand is growing.”

Crude oil in New York has dropped 43 percent this year compared with a 6.1 percent decline in Australian coal prices.

Consol surged $4.08, or 20 percent, to $24.88 in New York Stock Exchange composite trading. Peabody climbed $2.82, or 15 percent, to $21.57 and Arch Coal rose $1.40, or 11 percent, to $13.70.

Electricity Demand

Demand for electricity in major economies, where coal is used to generate 52 percent of power, will increase 3.3 percent by 2010, according to a UBS AG report on Nov. 17. Global coal use will rise 2 percent a year through 2030, led by China and India, the Paris-based International Energy Agency said Nov. 6.

Read the rest of this entry »


Stocks tumble as bailout plan fails in House

September 29, 2008

Monday September 29, 5:05 pm ET
By Tim Paradis, AP Business Writer

Stocks plunge as financial bailout plan fails in House vote; Dow fall 777, biggest drop ever

NEW YORK (AP) — Wall Street’s worst fears came to pass Monday, when the government’s financial bailout plan failed in Congress and stocks plunged precipitously — hurtling the Dow Jones Industrials (INDU) down nearly 780 points in their largest one-day point drop ever. Credit markets, whose turmoil helped feed the stock market’s angst, froze up further amid the growing belief that the country is headed into a spreading credit and economic crisis.

Stunned traders on the floor of the New York Stock Exchange, their faces tense and mouths agape, watched on TV screens as the House voted down the plan in mid-afternoon, and as they saw stock prices tumbling on their monitors. Activity on the floor became frenetic as the “sell” orders blew in.

The Dow told the story of the market’s despair. The blue chip index, dropped by hundreds of points in a matter of moments, and by the end of the day had passed by far its previous record for a one-day drop, 684.81, set in the first trading day after the Sept. 11, 2001, terror attacks.

The selling was so intense that just 162 stocks rose on the NYSE — and 3,073 dropped.

It takes an incredible amount of fear to set off such an intense reaction on Wall Street, and the worry now is that with the $700 billion plan fate uncertain, no one knows how the financial sector hobbled by hundreds of billions of dollars in bad mortgage bets will recover. While investors didn’t believe that the plan was a panacea, and understood that it would take months for its effects to be felt, most market watchers believed it was a start toward setting the economy right after a credit crisis that began more than a year ago and that has spread overseas.

“Clearly something needs to be done, and the market dropping 400 points in 10 minutes is telling you that,” said Chris Johnson president of Johnson Research Group. “This isn’t a market for the timid.”

The plan’s defeat came amid more reminders of how troubled the nation’s financial system is — before trading began came word that Wachovia Corp. (WB), one of the biggest banks to struggle due to rising mortgage losses, was being rescued in a buyout by Citigroup Inc (C). It followed the recent forced sale of Merrill Lynch & Co. (MER) and the failure of three other huge banking companies — Bear Stearns Cos. (BSC), Washington Mutual Inc. (WM) and Lehman Brothers Holdings Inc. (LEH); all of them were felled by bad mortgage investments.

Read the rest of this entry »


Hidden Credit Risks of ETFs

September 19, 2008

Friday September 19, 2:00 pm ET
By John Gabriel
Morningstar.com

Most exchange-traded products are index investments, backed by the actual portfolio of equities or bonds. Although an investor may be taking on the underlying risks of those portfolio holdings, they are not exposed to any risk from the issuer’s financial state. For example, if State Street (STT) were to go bankrupt (unlikely, even in these tumultuous times), investors in the SPDRs ETF (SPY) would be made whole by their claims on the underlying stock investments held by the unit trust.

However, not all exchange-traded products have this safety. Exchange-traded notes, or ETNs, are actually promissory notes with no claim on an underlying portfolio, so they are only as trustworthy as the debt of their backing bank. Morningstar’s director of ETF analysis, Scott Burns, recently wrote an article on ETNs and the credit risk that they face.

Besides ETNs’ inherent credit risk, some ETFs also posses a certain amount of credit risk. Some ETFs cannot invest directly in their underlying assets, relying on swaps, futures, or other derivatives to match the return on their index. These derivatives open those ETFs to counterparty risk, the risk that the institution on the other side of their trade will default, which could leave a fund with no return on its assets or even a loss. The ETFs vulnerable to counterparty risk fall into two major categories: leveraged funds and commodities funds.

Read the rest of this entry »


Stocks tumble after government bailout of AIG

September 17, 2008

Wednesday September 17, 5:54 pm ET
By Tim Paradis, AP Business Writer

Wall Street sinks again after Fed bails out AIG, Barclays buys Lehman businesses; Dow down 450

NEW YORK (AP) — Wall Street plunged again Wednesday as anxieties about the financial system ran high after the government’s bailout of insurer American International Group Inc. (AIG) and left investors with little confidence in many banking stocks. The Dow Jones industrial average lost about 450 points, giving it a shortfall of more than 800 so far this week.

As investors fled stocks, they sought the safety of hard assets and government debt, sending gold, oil and short-term Treasurys soaring.

The market was more unnerved than comforted by news that the Federal Reserve is giving a two-year, $85 billion loan to AIG in exchange for a nearly 80 percent stake in the company, which lost billions in the risky business of insuring against bond defaults. Wall Street had feared that the conglomerate, which has extensive ties to various financial services industries around the world, would follow the investment bank Lehman Brothers Holdings Inc. (LEH) into bankruptcy. However, the ramifications of the world’s largest insurer going under likely would have far surpassed the demise of Lehman.

“People are scared to death,” said Bill Stone, chief investment strategist for PNC Wealth Management. “Who would have imagined that AIG would have gotten into this position?”

He said the anxiety gripping the markets reflects investors’ concerns that AIG wasn’t able to find a lifeline in the private sector and that Wall Street is now fretting about what other institutions could falter. Over the past year, companies including Lehman and AIG have sought to reassure investors that they weren’t in trouble, but as market conditions have worsened the market appears distrustful of any assurances.

“No one’s going to be believing anybody now because AIG said they were OK along with everybody else,” Stone said.

Read the rest of this entry »


Gold prices post biggest 1-day gain ever

September 17, 2008

Wednesday September 17, 4:31 pm ET
By Stevenson Jacobs, AP Business Writer

Gold makes biggest 1-day gain ever as investors flock to safe-haven assets

NEW YORK (AP) — Gold prices exploded Wednesday — posting the biggest one-day gain ever in dollar terms — as fears of more credit market turmoil unnerved investors and triggered a flood of safe-haven buying.

Gold for December delivery rose as much as $90.40, or 11.6 percent, to $870.90 an ounce in after-hours trading on the New York Mercantile Exchange after jumping $70 to settle at $850.50 in the regular session. That was the biggest one-day price jump ever; gold’s previous single-day record was a $64 gain on Jan. 29, 1980. In percentage terms, it was gold’s largest one-day advance since 1999.

The huge rally came after the government moved overnight to rescue troubled insurer American International Group Inc. (AIG) with an $85 million bailout loan. The Federal Reserve stepped in after AIG, teetering on collapse from losses tied to the subprime crisis and the credit crisis, failed to find adequate capital in the private sector.

The emergency measure came a day after Lehman Brothers Holdings Inc. (LEH), a 158-year-old investment bank, filed for bankruptcy after failing to find a buyer.

Fearing more tightening of credit markets, investors reacted swiftly and began dumping stocks and socking money into gold, silver and other safe-haven commodities. Gold is especially attractive during times of crisis because the metal is known for holding its value.

Jon Nadler, analyst with Kitco Bullion Dealers Montreal, said buying accelerated as rumors spread across trading floors that another financial firm may be in trouble.

“The psychology right now has everyone asking, ‘Who’s next?,” Nadler said. “If another big bank falls, we could see an implosion and that has people very worried.”

A weaker dollar also boosted gold prices. A falling greenback encourages investors to shift funds into hard assets like gold and other commodities that are bought as hedges against inflation and weakness in the U.S. currency.

Read the rest of this entry »


Fed’s next move could be to lower rates

September 11, 2008

The central bank is likely to keep its key interest rate at 2% at its September 16 meeting but expectations are growing for a rate cut before year’s end.

By Chris Isidore, CNNMoney.com senior writer
Last Updated: September 10, 2008: 2:51 PM EDT

NEW YORK (CNNMoney.com) — While the Federal Reserve is widely expected to once again hold a key interest rate at 2% when it meets on Tuesday, there is a growing sense that the Fed may have to cut rates by the end of the year.

If the Fed does so, it would mark a dramatic change in the central bank’s assessment of the economy. As recently as the Fed’s last meeting in August, Fed members indicated that their next move would be to hike rates at some undetermined point in the future in order to fight inflation.

The Fed typically lowers interest rates during an economic slowdown in order to stimulate more borrowing and looks to raise them when it is more concerned about inflation.

The Fed slashed its federal funds rate, an overnight bank lending rate that helps determine how much interest consumers and businesses pay on various types of loans, seven times from September of last year through April in an attempt to minimize the damage from the mortgage crisis and credit crunch.

But the Fed has left rates unchanged at its past two meetings and started to indicate that it was growing more worried about rising commodity prices, particularly oil.

However, the U.S. economy, which once seemed on the verge of a recovery in the second-half of the year, has recently shown signs of weakening further.

Inflation fears fade

The unemployment rate jumped to 6.1% in August, the highest level in nearly 5 years. Economic growth is also slowing overseas. That could cut demand for U.S. exports, which was a main driver of the economic growth in the second quarter.

Read the rest of this entry »


Unraveling according to schedule

September 8, 2008

By Peter Brimelow, MarketWatch
Last update: 12:01 a.m. EDT Sept. 8, 2008

NEW YORK (MarketWatch) — A Fannie-Freddie bailout fillip in financial markets? Maybe, but a megabear says it just shows the world is unraveling right on schedule.

Harry Schultz’ The International Harry Schultz Letter was posted last night right about the time the Fannie Mae-Freddie Mac bailout was reported. But Schultz anticipated it, writing sarcastically:

“Flash: As we go to press, the US Government reveals plan to take over Freddie Mac and Fannie Mae, the biggest bail-out by taxpayers in history. It also wipes out the shareholders! Sunday selected to avoid stock market action same day, just as bank closures are told after market close Friday. That tells you what shape markets are in when government and CEOs hide behind holidays.”

Schultz had earlier made his overview clear (I’m translating slightly from of his text-message style):

“Fed maneuver room approximately gone. Any $US injection big enough to avert a depression triggers runaway inflation. If not big enough: depression. US on knife-edge. Gold helps you either way.

“Which brings us to [Pimco bond king] Bill Gross. He went crazy last week, urging government to bail out everyone, to save the system. Either he is a closet socialist, a corporate fascist … or just trying to get government to bail him out of 61% of his toxic waste mortgage backed securities.”

Schultz suggests just two alternative scenarios, both equally appalling:

“If Bush bails them all out, the die would be cast for inflation unseen in the West since 1923 Germany. If no bail: Hello, 1929.”

Gee, thanks.

Read the rest of this entry »


Massive Arctic ice shelf breaks away

September 3, 2008

Wed Sep 3, 2008 11:39am EDT

By David Ljunggren

OTTAWA (Reuters) – A huge 19 square mile (55 square km) ice shelf in Canada’s northern Arctic broke away last month and the remaining shelves have shrunk at a “massive and disturbing” rate, the latest sign of accelerating climate change in the remote region, scientists said on Tuesday.

They said the Markham Ice Shelf, one of just five remaining ice shelves in the Canadian Arctic, split away from Ellesmere Island in early August. They also said two large chunks totaling 47 square miles had broken off the nearby Serson Ice Shelf, reducing it in size by 60 percent.

“The changes … were massive and disturbing,” said Warwick Vincent, director of the Centre for Northern Studies at Laval University in Quebec.

Temperatures in large parts of the Arctic have risen far faster than the global average in recent decades, a development that experts say is linked to global warming.

“These substantial calving events underscore the rapidity of changes taking place in the Arctic,” said Derek Mueller, an Arctic ice shelf specialist at Trent University in Ontario.

“These changes are irreversible under the present climate and indicate that the environmental conditions that have kept these ice shelves in balance for thousands of years are no longer present,” he said in an e-mailed statement from the research team sent late on Tuesday.

Mueller said the total amount of ice lost from the shelves along Ellesmere Island this summer totaled 83 square miles — more than three times the area of Manhattan island.

The figure is more than 10 times the amount of ice shelf cover that scientists estimated on July 30 would vanish from around the island this summer.

Read the rest of this entry »


The Death of Crude Oil and the Commodity Rally?

August 11, 2008

The current correction in crude oil (and most commodities) has developed into more than just a normal pullback, taking out several primary support levels. The last major drop like this was in the summer of 2006, when crude dropped 36.1% from almost $80 to just above $50. A similar drop this time would take crude all the way back to $94.51; but we think the real battle will take place at the all important, round number $100 level. It took 5 attempts and much media hype to break $100 on the upside, and this was immediately followed by 5 weekly tests from above as support. Crude then rallied 50% in four months (eventually almost tripling from the lows) before topping out just under $150 at the beginning of July. A similar rally from the lows this time would put crude near the high level target of $250 on its next leg up.

Confirming this support are the commodity indices themselves. These show very similar targets to the one suggested by crude. First, the CRB, the most widely watched commodity index; with a heavy energy weighting. The daily chart shows the various support levels including the key retracement levels and the moving averages. First retrace support at 38.2% held for a while and we even had a minor bounce. Next up was the 200 day which held for two days before falling on Friday thanks to a strong showing by the dollar (see this chart below). We closed Friday right on the 50% retrace level, but we think we may ultimately be headed for the 61.8% retrace (the last support level in a bullish correction) because of what we see on the other charts including crude above and those below.

Read the rest of this entry »


Bernanke the Magnificent? or The Amazing Bernanke?

July 18, 2008

Well, our president may not have a magic wand, but it looks like our Fed Chairman does.

This weekend Big Ben got together with his govt. cronies and they whipped up a wicked brew that is the antidote to the housing crisis and savior of all things financial. The SEC put the clamps on the shorts, the Treasury got into the mortgage underwriting business and Big Ben opened the Fed money faucet a little wider.

Hooray!??

Let’s see, that’s $30B for Bear Stearns, $8B for Indy Mac & now $5T worth of mortgages at Fannie and Freddie. I wonder if the cost of printing dollars has gone up with the increased raw material costs?

Our LD President Bush danced on the scene with an empty promise to drill the OCS for a few hundred thousand Bpd in 10 years and the world was right again.

Oil plunged, bank stocks soared. It must have brought a smile to their faces.

But is it reality? Have the finance gods truly been appeased?

Read the rest of this entry »


What goes around comes around

July 17, 2008

This post is a follow up to Rotation, Rotation, Rotation in June.

Over the last month, we have seen the trends highlighted in that note accelerate. The March lows did not hold in the SPX and the financials led the way with the XLF (Financials Select Sector SPDR) dropping a full 26% for the month at its lows just two days ago. The SPX “only” dropped almost 11% in comparison.

But in the last two trading days, both have almost halved their losses for the month with the XLF jumping almost 25% from top to bottom in two days! Of course the math still leaves XLF down over 12.5% since our writing and SPX lagging relatively in the comeback with a loss of still over 7%. Since Wrong Again Ben in December, the XLF is down over 31% with the SPX down almost 15%.

Read the rest of this entry »


Continental Resources shares up on 2nd Bakken Shale well results

July 10, 2008

Thu Jul 10, 2008

By Chakradhar Adusumilli

BANGALORE, July 10 (Reuters) – Shares of Continental Resources Inc (CLR) rose as much as 20 percent to a life high, a day after the company said its second crude oil well in the Bakken Shale area of North Dakota reported a higher flow rate than its first.

The oil and gas explorer’s flow rate for the second well was about 58 percent higher than the first, which flowed at an average rate of 693 barrels of crude oil equivalent per day in its initial week of production in May.

The second well, Mathistad 1-35H, began production on July 4 and flowed at an average rate of 1,095 barrels of crude oil equivalent per day, with 90 percent of production being crude oil and 10 percent natural gas.

Natixis Bleichroeder analyst Curtis Trimble said the latest results from the Three Forks/Sanish formation increased the productive profile of the Bakken Shale area.

“Future wells will be closer to the 600 to 1000 barrel a day level versus previous wells that were averaging about 450 barrels a day,” Trimble said by phone.

The analyst, who maintained his “hold” rating, raised his price target on the company to $78 from $75 a share, citing higher estimated commodity prices.

Read the rest of this entry »


Energy’s easiest fix: Use less

July 3, 2008

While calls for more oil drilling dominate the headlines, experts say taking simple steps to use less could save twice as much.

By Steve Hargreaves, CNNMoney.com staff writer
Last Updated: July 3, 2008: 11:06 AM EDT

NEW YORK (CNNMoney.com) — Want to help the country save a quick million barrels of oil a day? Drive 5% less. Slow down. Inflate your tires.

Those three steps would reduce U.S. oil consumption by 1.3 million barrels a day immediately, according to the Alliance to Save Energy, a conservation group running an efficiency campaign backed not only by environmental groups but also the auto and oil industries.

That’s nearly twice the estimated daily oil production that could come from drilling in the Alaska’s Arctic National Wildlife Refuge, according to the government’s Energy Information Administration.

According to Julius Pretterebner, a vehicles and alternative-fuels expert at Cambridge Energy Research Associates, a consultancy that does a lot of work for the oil companies, how fast people drive and how quickly they accelerate is responsible for 10% to 30% of fuel consumption.

“It’s significant, and it’s the only thing we can do in the short term,” said Deron Lovaas, vehicles campaign director at the Natural Resources Defense Council, which partners with the Alliance to Save Energy on an effort to educate drivers on efficiency.

The United States consumes 20 million barrels of oil a day, nearly 10 million of which goes to making gasoline. The world gobbles up 85 million barrels of oil in all.

Rather than focusing on reducing demand for oil, the debate over the soaring cost of energy in recent weeks has been about boosting supply and more regulation of “speculators.”

Read the rest of this entry »


Don’t blame the oil ‘speculators’

June 27, 2008

A campaign in Congress to punish traders for record oil prices reveals a fundamental misunderstanding of how futures markets work

By Jon Birger, senior writer
Last Updated: June 27, 2008: 9:11 AM EDT

NEW YORK (Fortune) — “Make no mistake about it,” U.S. Rep. Bart Stupak, D-Mich., said Monday while chairing a meeting of the House Energy and Commerce subcommittee on Oversight and Investigations. “Excessive speculation in commodity markets is having a devastating effect at the gas pump that is rippling through our entire economy.”

Here’s a suggestion: The next time a Congressional committee wants to hold a hearing on how “speculators” are driving up oil prices, each committee member should first be required to demonstrate – preferably in their opening remarks – a basic understanding of the mechanics of futures trading.

Even better, they should be required to explain in detail how it is that investors who never take delivery of a single barrel of crude – and thus never remove a drop of oil from the open market – are causing record high oil prices.

If there were such a requirement, I guarantee we’d never again see a circus like the one Stupak presided over Monday.

“Do I think [Washington politicans] understand the role of futures markets – how they facilitate price discovery and the transference of risk?” asks former U.S. Commodities Futures Trade Commission chief economist Gerald Gay. “No, they’re clueless – at least most of them.”

Read the rest of this entry »


No end seen in reliance on oil, fossil fuels

June 25, 2008

Wednesday June 25, 3:05 pm ET
By H. Josef Hebert, Associated Press Writer

Powered by China and developing nations, world energy demand seen growing 50 percent by 2030

WASHINGTON (AP) — World energy demand will grow 50 percent over the next two decades, oil prices could rise to $186 a barrel and coal will remain the biggest source of electricity despite its effect on global warming, government experts predict.

The Energy Information Administration’s long-range forecast to 2030 said the world is not close to abandoning fossil fuels. They will continue to be at the core of energy production in transportation and electricity generation, according to the report released Wednesday.

It said the steepest increases in energy use will come in China and other developing economies, including some in the Middle East and Africa, where energy demand is expected to be 85 percent greater in 2030 than it is today.

“What jumps out is the very strong growth in the emerging economies,” said Guy Caruso, the head of the agency that serves as the government statistical and forecasting arm on energy.

The outlook largely assumes no mandatory international agreements on capping greenhouse gases, especially heat-trapping carbon dioxide, which comes from burning fossil fuels. Fossil fuel use “could be altered substantially” by such deals, the report said.

Without such limits, the annual amount of carbon dioxide flowing into the atmosphere would be 51 percent greater in 2030 than it was three years ago, the study said.

It said fossil fuels are expected to continue supplying much of the energy used worldwide despite the growth of renewable energy sources, including wind and biofuels.

Read the rest of this entry »


Dearth of Ships Delays Drilling of Offshore Oil

June 19, 2008

By JAD MOUAWAD and MARTIN FACKLER
New York Times

As President Bush calls for repealing a ban on drilling off most of the coast of the United States, a shortage of ships used for deep-water offshore drilling promises to impede any rapid turnaround in oil exploration and supply.

In recent years, this global shortage of drill-ships has created a critical bottleneck, frustrating energy company executives and constraining their ability to exploit known reserves or find new ones. Slow growth in oil supplies, at a time of soaring demand, has been a major factor in the spike of oil and gasoline prices.

Mr. Bush called on Congress Wednesday to end a longstanding federal ban on offshore drilling and open the Arctic National Wildlife Refuge for oil exploration, arguing that the steps were needed to lower gasoline prices and bolster national security. But even as oil trades at more than $135 a barrel — up from $68 a year ago — the world’s existing drill-ships are booked solid for the next five years. Some oil companies have been forced to postpone exploration while waiting for a drilling rig, executives and analysts said.

Demand is so high that shipbuilders, the biggest of whom are in Asia, have raised prices since last year by as much as $100 million a vessel to about half a billion dollars.

“The crunch on rigs is everywhere,” said Alberto Guimaraes, a senior executive at Petrobras, the Brazilian oil company that has discovered some of the most promising offshore oil but has been unable to get at it.

“Almost 100 percent of the oil companies are constrained in their investment program because there is no rig available,” he said.

Read the rest of this entry »


World Crude Production Has Peaked – Pickens

June 17, 2008

WASHINGTON – World crude oil production has topped out at 85 million barrels per day even as demand keeps climbing, helping to drive a stunning surge in prices, billionaire oil investor T. Boone Pickens said on Tuesday.

“I do believe you have peaked out at 85 million barrels a day globally,” Pickens, who heads BP Capital hedge fund with more than US$4 billion under management, said during testimony to the Senate Energy and Natural Resources Committee.

The United States alone has been using “21 million barrels of the 85 million and producing about 7 of the 21, so if I could take just a minute on this point, the demand is about 86.4 million barrels a day, and when the demand is greater than the supply, the price has to go up until it kills demand,” Pickens told lawmakers.

US crude futures have risen by a third since the start of the year and more than six-fold since 2002 as surging demand from China and other developing nations outpaces new production.

Oil slipped on Tuesday, a day after touching a record high near US$140 a barrel, but remained above US$133 a barrel.

Pickens, who announced a US$2 billion investment in wind energy earlier this year, told lawmakers during a hearing on renewable electricity that he expected “the price of oil will go up further.” Without alternatives, the cost of foreign oil will drain the United States of more resources, he said.

“In 10 years, we will have exported close to US$10 trillion out of the country if we continue on the same basis we’re going now. It is the greatest transfer of wealth in the history of mankind,” he said.

Pickens downplayed the role that speculative trading and institutional investors — forces some see behind the high oil prices — have had in the price trend.

Read the rest of this entry »


Is Electricity From Wind Just A Lot Of Hot Air?

June 17, 2008

Tuesday June 17, 5:47 pm ET
Joanne Von Alroth

You could think of it as “energy sailing.”

Hoping to catch the financial breeze powering alternative energy, First Trust Advisors will launch the world’s first wind energy exchange traded fund on Wednesday. The First Trust ISE Global Wind Energy Index Fund will trade on NYSE Arca under the ticker FAN.

The new fund will track a three-week-old index with 53 companies that are active in the wind energy industry. Nearly 67% of the listed companies must provide products and services exclusively to the wind energy industry. The other 33% must have a “significant” part of their business devoted to wind energy, said First Trust Chief Investment Officer Robert Carey.

All the companies must actively provide or develop wind energy and have market caps of at least $100 million. The index, owned and developed by the International Securities Exchange, is calculated in real time and maintained by Standard & Poor’s. It will be rebalanced semi-annually.

Soaring Oil

It’s no coincidence that the fund sets sail just as oil hit a record high Monday of $139.89, Carey said. “This has been a matter of some urgency. We’ve been working very hard on it for about six months” as oil prices skyrocketed, he said.

“In addition to rising oil and natural gas prices, there’s supply security and mitigation efforts related to environmental problems and climate change,” he said. Global warming issues aside, wind energy proponents point out that its use reduces acid rain and oil spills.

Industry Growth

Ten years ago, the U.S. had less than 2,000 megawatts of wind capacity. Last year, wind energy generation companies saw 27% growth as they boosted their capacity to 94,000 megawatts. A megawatt — 1 million watts of electric power — provides power for about 380 U.S. residents, according to the American Wind Energy Association.

Read the rest of this entry »


Hot commodities

June 11, 2008

The big question about resources: Is it too late to invest? Short answer: Nope. And it’s easier than ever to get into the game.

By Brian O’Keefe, senior editor

(Fortune) — Back in 2001, the executives running Australian mining giant BHP Billiton sensed that China’s economic growth was gaining critical mass. So they commissioned a study on how the country’s rapid industrialization might affect the global markets for copper, coal, iron ore, oil – all the stuff that the company pulls out of the earth and sells.

“The results were quite – well, ‘outrageous’ is probably the right word,” CFO Alex Vanselow told me when I visited BHP’s headquarters in Melbourne a few months back. “Because we didn’t believe it. We thought something must be wrong. If our models were right, the pressure China would put on the world would be tremendous.”

But the more they tinkered with their models, the more unbelievable the results became. The fast-growing per-capita income of China’s billion-plus people pointed toward a massive thirst for raw materials. When the researchers added India’s potential for growth – and its own billion-plus population – the numbers got even more extraordinary. And when they factored in the industry’s inadequate investment in new production capacity, they concluded that over the next two decades there would be a historic demand-driven boom in the resources world.

Today, of course, the commodities boom that the BHP (BHP) study anticipated is in full swing – and impossible to ignore. You see it every day in the $100-plus it now costs to fill up your SUV. Or the 39% increase in the cost of electricity over the past eight years. Or the fact that you’re paying 20% more for that box of pasta than you were a year ago.

As painful as all those rising prices can be for consumers, the bull market in raw materials has proved to be an awesome investment opportunity. Over the past five years the S&P 500 has had a total return of 59%. But over the same period, the diversified Dow Jones-AIG Commodity index has risen some 110%, and the S&P GSCI Commodity index, another broad measure, has jumped 141%. The price of gold has more than doubled, and crude oil and copper have soared more than fourfold. If you were prescient enough to go long on rice on New Year’s Day, you’ve already seen a return of 33% this year.

No wonder, then, that money is flooding into resource markets. According to Gresham Investment Management, institutional investors like pension funds and endowments had $175 billion in commodities at the end of 2007, up from $18 billion in 2003. Just as predictably, Wall Street has rushed out a flurry of new products geared toward individual investors.

Read the rest of this entry »


%d bloggers like this: