Record Breaking Contango Suggests Higher Oil Prices for 2011

ConocoPhillips (NYSE: COP) is paying $41,000 a day to keep a storage tanker capable of holding 3 million barrels of oil floating in the Gulf of Mexico, according to international ship- and offshore broking firm RS Platou. And the TI Europe is just one of hundreds of oil tankers sitting idle in waters around the world, as energy companies and investment banks await higher prices for crude.

Oil prices have fallen precipitously since the spring, as optimism about "green shoots" of economic growth gave way to fears of a double-dip recession. Prices have fallen more than 12% to $75.81 a barrel, from a high of $86.54 a barrel in April.

Indeed, with the U.S. economy stuck in the mire, the global outlook for oil demand has diminished – at least in the near-term. Longer-term, however, traders expect prices to surge higher next year as growth solidifies. That's why contracts for crude set to be delivered six months from now are worth more than crude at its current prices – an anomaly known as "contango."

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Petrobras Sets Long-Term Financing Plan by Selling $42.5 Billion of Stock to Government

Petroleo Brasileiro SA (NYSE ADR: PBR), the Brazilian national oil company better known as Petrobras, announced Wednesday that it had agreed to issue $42.5 billion in new stock to the Brazilian government to obtain the rights to five billion barrels of oil in offshore fields.

Petrobras will pay an average of $8.51 a barrel for the oil after almost two weeks of negotiations with the government, according to a regulatory filing. More than half the oil will come from the Franco field in the offshore Santos Basin, the company said.

Even though the company paid what is seen by many analysts as a premium for the rights, the deal is the linchpin for the Latin American oil giant's long-term financing plans.

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Is BP Dealing Away Its Future?

In the aftermath of the biggest environmental disaster in U.S. history, the Gulf of Mexico relief-well saga continues to monopolize our attention.

But here's the reality: Money problems – not the relief wells – could prove to be the undoing of BP PLC (NYSE ADR: BP). And that means the company's fate is most closely tied to its ongoing efforts to raise money by selling key assets from around the world.

BP is looking to divest $30 billion in assets during the next 18 months.Selling its assets is one way for the company to raise the money needed to cover its expected liabilities. But here's the problem: Those sales are moving right into the teeth of a new round of mergers-and-acquisitions (M&A) deals that were already taking place in the oil-and-gas sector, due to rising volatility there and the inability of some to withstand the uncertainty.

As a result of all this wheeling and dealing, the big will get bigger – and BP will get smaller. Indeed, the BP that emerges from the mess that it created should be smaller, leaner and smarter. But will that be good enough?

To understand BP's financial strategy, please read on...

Crude Oil Prices Tumble as IEA Warns Economic Woes Could Stunt Demand

Oil prices yesterday (Wednesday) fell below $80 a barrel after the International Energy Agency (IEA) warned that demand could be curtailed if global economic growth is weaker than expected.

The warning came even as the IEA, an energy adviser to 28 industrialized countries, slightly increased forecasts for global crude demand for this year and 2011.

However, those projections were based on revisions to historical oil-demand data and on forecasts issued by the International Monetary Fund (IMF) nearly four weeks ago. Since that time, economic news in the United has become gloomier.

The U.S. Federal Reserve said after its policy meeting on Tuesday that the pace of economic recovery had slowed in recent months and was expected to be "more modest in the near term" than previously thought.

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Gasoline-Price Forecasting: What Sam the Gas Station Owner Knows That We Don't

What started out as a routine fill-up at the service station that I frequent has turned into a solid gasoline-price-forecasting model that should spotlight the most-imminent profit opportunities.

Of course, it wouldn't have happened without Sam.

Sam runs a gasoline station 12 miles from my house, in a little, out-of-the-way, suburban town. We have formed a friendship, of sorts, through the years. He's one of the few people I run into on a regular basis who does not ask me where gasoline prices are headed.

He already knows.

To find out how Sam's pricing prescience can mean profits for you, please read on...

Money Morning Mailbag: BP Stuck in Oil Spill Spotlight While Others Downplay Disasters

The BP PLC (NYSE ADR: BP) oil spill disaster has shone a spotlight on oil industry pollution. While BP takes the brunt of public anger, no oil company has escaped the wrath of critics who are eager to expose an industry they feel shortcuts safety standards for profit.

Comments from readers with first-hand industry experience continue to pour into Money Morning's Mailbag, sharing their thoughts on the oil industry's operations.

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Why You Should Worry About the Iran Oil Sanctions

I cut my teeth doing energy-related deals in the Soviet Union and still spend a lot of time consulting in Russia and the Caspian Sea basin. These days, my work takes me all over the globe. But the part of the world where my career began still holds the key for future oil supplies.

Especially the Caspian.

This land-locked body of water borders five countries, each having major oil-and-gas reserves.

One of those countries is Iran – the focus of the latest problem that's cropped up in the global energy sector.

And that "problem" – Iran oil sanctions – is certain to bring about an increase in the price of crude oil.

Two sanction-spawned catalysts will boost oil prices. To see them, read on...

Question of the Week: Readers Respond to Money Morning's BP Image Query

BP PLC (NYSE ADR: BP) last week confirmed that Robert Dudleyan American and a company insider – would be replace Tony Hayward as the company's chief executive officer in a move that's intended to improve the battered BP image.

Dudley, who takes over Oct. 1, will have to take on a double-edged challenge. He has to continue the cleanup effort that he's headed since June. And he must persuade the U.S. government that BP should be allowed to continue offshore drilling work in the Gulf of Mexico – the region it has targeted for 25 of its 40 future production operations over the next five years.

Because he's led the BP oil-spill-response efforts since June, Dudley has developed a much closer rapport with U.S. officials than his predecessor. Make no mistake: The respect he commands was a key reason for BP's swap at the top.

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BP's Offshore Plans Spark Talk of Drilling Ban Among Concerned European Nations

BP PLC's (NYSE ADR: BP) plans to drill for oil and gas off the coast of Libya within weeks has caused nearby European countries like Italy to sound the alarm for a drilling ban until they ensure the safety of surrounding waters.

Italy's Environment Minister Stefania Prestigiacomo was the first European Union official to suggest a drilling ban to give nations around the Mediterranean Sea time to coordinate a drilling policy.

"A moratorium could be a right approach for potentially dangerous drilling…to give Europe time to define a new and specific strategy for the Mediterranean especially in light of the risk exposed by the Deepwater Horizon spill," Prestigiacomo wrote to the Financial Times.

BP has a rig in Libya's Gulf of Sirte, about 500 kilometers from Italian and Maltese territory. The first of five planned wells will be about 200 meters deeper than the Macondo well that spewed as much as 184 million gallons of oil into the Gulf of Mexico for almost three months.

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Special Report: New CEO Dudley Isn't the Long-Term Answer at BP, Expert Says

When readers ask me how Dr. Kent Moors could be up nearly 60% on a portfolio that he only launched July 6, I don't give them an answer.

I tell them a story.

When the BP PLC (NYSE ADR: BP) CEO-replacement saga began to unfold earlier this week, and the Money Morning news team was working the story, I contacted Dr. Moors to ask him if he knew anything about anointed successor Robert Dudley.

With that response, Dr. Moors underscored, yet again, why he's the ultimate energy-sector insider: He doesn't just know about Dudley – he actually knows him.

In fact, Dr. Moors went on to give me an analysis of the new CEO's managerial style, including Dudley's strengths and weaknesses. Dr. Moors even went as far as highlighting the elements of Dudley's managerial proclivities – and the elements of BP's strategy – that pose the biggest risks to the Big Oil company's turnaround.

For the full story on BP’s new CEO, please read on…

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