Oil Industry Headlines: Week of April 12
Oil prices hit a record high of $117 this week due to several contributing factors: On Monday, Mexico shut-in several crude oil shipping ports in anticipation of bad weather. The supply disruption affected approximately 80% of Mexico’s crude exports for the day. On Wednesday, the U.S. Department of Energy announced an oil inventory drop of 2.3 million barrels. Most analysts were expecting a decline of only 1.8 million. Also this week, attacks on a Nigerian pipeline forced Royal Dutch Shell RDS to partially shut down production. “Shell - the company which has been hit worst by Niger Delta violence - is producing around 400,000 barrels per day below its full capacity from Nigera because of attacks and kidnappings by MEND since 2006,” reported Reuters. When will high oil prices cause a significant curb in demand? Many analysts believe the ceiling may be $150 per barrel or more. “This bull market has got a long way to run,” Puru Saxena, CEO of Puru Saxena Ltd. told Bloomberg this week. “We have severe supply-and-demand imbalances all across the commodities complex, whether it’s food, base metals, precious metals, energy.”
Mexico’s state-owned oil company, Pemex, is in crisis after decades of underinvestment have thwarted the discovery and development of new resources. Although it was the sixth largest producer of oil in 2006, production rates have fallen so sharply that Mexican officials predict oil production will stop altogether in less than ten years. Leaders are divided (to say the least) over what to do. Last week President Felipe Calderon sent a reform bill to Congress designed to enhance Pemex’s profitability and give it access to more exploration and development funds. To accomplish this, Calderon wants to give Pemex the authority to contract with private firms. The legislation is vehemently opposed by the political majority, who chose to demonstrate their disapproval by seizing the podiums of both houses, forcing Congress to “cram into conference rooms to press ahead with routine business on Tuesday,” reported BBC News.
Published Friday, April 18th, 2008 at 10:50 am and filed under Industry News.