On the up?

Oil Price 1Q May 2015

The oil price has bounced back a bit in recent weeks, with prices up to around $65 per barrel for Brent Crude compared to lows in January of less than $50.

This is despite Saudi Arabia shipping more crude in March than in any month since November 2005 as reported in this article from Downstream Today.

What is interesting is the deliberate intention of Saudi Arabia to squeeze other oil producers around the World, notably the US, Russia and Iran.

This article quotes a Saudi official talking to the FT and saying;

“There is no doubt about it, the price fall of the last several months has deterred investors away from expensive oil including US shale, deep offshore and heavy oils.”

It also reports that while Saudi Arabia increased oil production to 10.31 million barrels of oil per day in April,

“the number of rigs running in the US has dropped by 60 per cent as companies have either sought to cut costs in response to lower oil prices or have simply gone out of business.”

Good news for consumers; although the period of cheap petrol didn’t seem to last long in the UK it does seem to be translating into cheaper food prices – as highlighted by the UK inflation figure dropping to -0.1% yesterday. But bad news for those in the industry that are seeing a marked slow-down in new projects coming through.

EU Green Law Added 40 Euro Cents/Barrel to Refining Costs

_Red lorry yellow lorry

 

Refining margins are tight – we all know that.  With spot prices falling things will ease a bit, but it doesn’t help when politicians decide that Big Energy is a handy cash cow in times of austerity.

This report outlines how EU energy policy is hitting refiners in Europe.

EU green energy law added 40 euro cents a barrel to costs for Europe’s refineries, but the decisive factor in undermining their competitiveness was a steep rise in energy costs, preliminary European Commission research has found.

No kidding!

And get this …

Energy costs in the EU rose four-fold in 2000 through 2012, compared with a doubling elsewhere in the world, where prices overall were held back by the rise in U.S. shale production.

So when politicians tell you that the EU is good for business, or that they will freeze prices as a solution to the problem, be very suspicious.