Oil extended earlier falls as end of week profit taking gained momentum amid a stronger dollar, news of increased oil flows from Nigeria, restored flows in Iraq and renewed worries over the US economic slowdown.
Venezuela is not interested in seeing oil prices rise further and is pushing to stabilize the market, President Hugo Chavez said Thursday following a visit to the site of a Brazilian refinery being built to process Venezuelan crude.
The Meridian Resource Corporation (NYSE:TMR) announced today that Chairman and CEO Joe Reeves will update investors and analysts on its current operations and future strategy at the IPAA Oil and Gas Investment Symposium in New York City on Monday, April 7, 2008 at 4:10 p.m. Eastern time.
UTS Energy Inc (Toronto: UTS.TO), which specializes in developing oil sands properties, along with their partner Teck Cominco LTD (NYSE:TCK), announced Wednesday that they have plans to develop a new oil sand mine that will eventually produce on average about 160,000 barrels of "tar-like bitumen" a day.
The project will be on the Fort Hills oil sands, where projections are the "Frontier" mine should be producing bitumen by 2015. Bitumen is one form of crude that is extra-heavy, and has to be upgraded.
There's another mine they're also looking at developing near the Fort Hills oil sands, which while smaller, they project could an additional 50,000 barrels a day. That mine, dubbed Equinox, should be up and running by 2014.
All of this is made possible by the rising price of oil, which made past development of heavier crude cost prohibitive.
Most of the costs come from having to separate the bitumen from the sand and then upgrading it to synthetic crude ready for the refineries.
The two companies haven't decided yet whether they'll have the heavy crude upgraded at the Fort Hills project, or ship it as is to refineries.
They're also looking to possibly make a deal with American refineries, where they offer a share in their oil sand holdings for a stake in the refinery. Two other Canadian companies - EnCana Corp (Toronto: ECA.TO) and Husky Energy Inc (Toronto:HSE.TO) - have made deals like that with U.S. refineries.
Estimates are the northern Alberta oil sands area should end up producing about 3 million barrels a day by 2015.
With the drop in crude oil prices for the fourth day in a row in New York, it has caused speculation that the continually slowing U.S. economy will cause less demand for oil and result in growing reserves.
The strengthening of the U.S. dollar has also caused investors to move some of their money out of commodities, as its use as an inflation hedge is looked upon as over - at least for now.
On the NYMEX, oil fell as low as $99.66 a barrel in after-hours trading; about 1.2 percent overall. Since March 17, oil has plunged by 11 percent from the record $111.80 a barrel it reached at that time.
Brent crude for May fell to $99.07 a barrel, or 79 cents on London's ICE Futures Europe exchange. That's down from the $99.86 it finished at yesterday; the first time since March 4 it fell ended the session below $100 a barrel.
The question for Exxon Mobil (NYSE: XOM) isn't whether they're able to produce more oil, rather it's whether they are willing to. I think the answer is they're not willing to, and will maintain their production at about where it's at today over the next few years.
Exxon Chairman Rex Tillerson, at a March meeting with analysts, responding to the question of why the company wasn't looking to generate more growth through 2012.
Tillerson said, "We don't start with a volume target and then work backwards, it really goes back to what is an acceptable investment return for us."
That's another way of saying that increasing production for the sole purpose of causing oil prices to decrease isn't a good way of doing business. This solid way of doing business is one of the reasons the company led a very profitable industry with a return on capital of 32 percent.
This is music to shareholders ears, as that, along with the buyback of company shares, has resulted in less shares available to the public, and more barrels distributed per share for Exxon shareholders. Tillerson said that the buybacks have resulted in shareholders enjoying a 20 percent increase in their portion of the oil production of the company.
Another question to consider is whether Exxon is able to produce more. This must be asked because their production in decreasing by a large amount in its European and U.S. regions, dropping by a huge 37 percent since 2000. That equals approxmately 500,000 barrels less a day now, than it did that short time ago.
The problems in Venezuela stealing the business away from Exxon through Hugo Chavez nationalizing the fields, as well as the specific deals made with some foreign countries, where Exxon puts up the investment capital, and is paid back in barrels of oil. Once oil prices increase to a certain level, Exxon gets less of the barrels. The obvious ramifications of the current price of oil speaks for itself: Exxon has lost a lot of barrels there.
Even so, over the next four years, Exxon will bring new fields into the fold in Africa, Russia and the Middle East. While they could conceivably increase output above the losses mentioned before, they're choosing to grow at a rate that basically replaces existing losses, rather than increase production.
This looks like a good plan to me, and shareholders should reap the benefits for years to come.
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The ups and downs of commodities, the U.S. dollar, and the oil market continue, as oil futures dropped below $100 a barrel today, making it a plunge of about 10 percent since it hit record highs of $111.80 a barrel on Monday.
Light sweet crude for New York oil in May fell to $99.20 a barrel, while London's Brent North Sea crude dropped by $2.50, to end at $98.42 a barrel.
Much of the ups and downs comes from the declining U.S. dollar, which commodities are denominated in. The strength of foreign currencies provides cheaper buy-in for investors.
As far as available reserves in the U.S., the US Energy Information Administration (EIA) said for the week ending March 14, they increased by 200,000 barrels, to bring the total to 311.8 million barrels. That's the typical amount for this time of year, although the market thought it would rise to about 2.3 million barrels.
The banking and credit problems are seen as another key contributor to the price decline in oil, which could potential slow global growth down significantly.
It's going to take some time for this to all work itself out, as so many variables are floating around out there. Until those things settle down, the price of oil won't, neither will a lot of other commodities.