Peak Oil Review – Feb 23

1. Production and Prices

2. The March OPEC meeting

3. Nigeria

4. China goes shopping

5. Briefs

1. Production and Prices

In a shortened trading week, high volatility continued due to the now familiar conflict between a widening world recession and OPEC production cuts. There were, however, surprises along the way. When the weekly US inventory report was released on Wednesday showed US crude inventories falling by 200,000 barrels as opposed to an expected 3 million barrel increase, oil rebounded 14 percent from a drop earlier in the week. The inventory decline was largely due to a decrease in imports which may be only temporary or possibly an early indication that OPEC production cuts are starting to take hold. Prices closed out the week at $40 a barrel, a couple dollars below where they started. […]

2. The March OPEC meeting

With three weeks to go before the March 15th OPEC meeting, speculation is rife about what the cartel will do regarding additional production cuts. The traditional price hawks Venezuela and Iran continue to call for another cut, while the OPEC governors, as distinct from the decision-making Oil Ministers, are reported to be opposed to another cut at this time. The governors, however, agree that the market is still oversupplied by about 1.6 million b/d and that a cut of this size may be necessary in the second quarter. […]

3. Nigeria

There were more indications last week that the security, economic, and political situation in Nigeria continues to deteriorate. As more than 300 oil industry employees have been kidnapped in the last three years, foreign oil workers must travel by air or in military convoys, adding greatly to costs and reducing efficiency. In an effort to cut costs in 2008 Shell eliminated 1200 oil-worker jobs in the country and is likely to cut more this year. Shell, BP, and Total all suffered losses last quarter and the income of the other international oil companies operating in Nigeria was greatly reduced. […]

4. China goes shopping

With circa $1.5 trillion in foreign reserves, Beijing is taking advantage of low oil prices and the global recession to gain long-term access to sources of oil and other minerals around the world. In recent weeks China has announced concluded or pending deals with Russia, Saudi Arabia, Brazil, Venezuela, and Australia. In most cases, cash-strapped companies and governments are more than happy to take China