Breaking Up Is Hard to Do
They say that breaking up is hard to do, now you know, you know that it's true. Just say that this is the end? Will the EU find that breaking up is hard to do?
This weekend the EU solidarity is being pushed to the limit, increasing speculation that this union will be broken. The Swiss, tired of carrying the water and the risk aversion for the EU, took the dramatic step of pegging its currency to the euro to stop the run on those so called safe Swiss francs, leaving gold to set another new record nominal high. In a flight to safety the 10-year yield hit a 60-year low. Worries surrounding Europe and China are playing into global slowdown fear that can impact the demand prospects for oil. The Wall street Journal said that, "Top European central bankers said Monday its urgent that Eurozone members quickly implement Greece's second aid program and agree changes to the bloc's rescue fund amid ‘overshooting’ borrowing costs for the region's peripheral countries. Speaking at a conference in Paris, ECB President Jean-Claude Trichet and his incoming successor Mario Draghi also said euro nations must press ahead with structural reforms to strengthen the bloc's economic and fiscal governance to prevent future crises."
Oil prices have been hit hard in the global uncertainty despite the fact that about 61% of oil production and 46% of natural gas output from the Gulf of Mexico has been shut due to tropical storm Lee. The U.S. Bureau of Ocean Energy Management reported that 858,935 barrels of oil per day have been curtailed, which compares with 843,223 barrels shut in on Sunday. About 2.44 billion cubic feet of gas per day have been shut in, comparing with 2.35 billion on Sunday, the bureau said.
The Bureau says that, "Based on data from offshore operator reports submitted as of 11:30 a.m. yesterday, personnel have been evacuated from a total of 232 production platforms, equivalent to 37.6% of the 617 manned platforms in the Gulf of Mexico. Production platforms are the structures located offshore from which oil and natural gas are produced. Unlike drilling rigs, which typically move from location to location, production facilities remain in the same location throughout a project’s duration....Personnel have been evacuated from 24 rigs, equivalent to 34.3% of the 70 rigs currently operating in the Gulf. Rigs can include several types of self-contained offshore drilling facilities including jackup rigs, submersibles and semisubmersibles....As part of the evacuation process, personnel activate the applicable shut-in procedure, which can frequently be accomplished from a remote location. This involves closing the sub-surface safety valves located below the surface of the ocean floor to prevent the release of oil or gas. During the recent hurricane seasons, the shut-in valves functioned 100% of the time, efficiently shutting in production from wells on the Outer Continental Shelf and protecting the marine and coastal environments. Shutting-in oil and gas production is a standard procedure conducted by industry for safety and environmental reasons....From operator reports, it is estimated that approximately 61.4% of the current oil production in the Gulf of Mexico has been shut-in. It is also estimated that approximately 46% of the natural gas production in the Gulf of Mexico has been shut-in. The production percentages are calculated using information submitted by offshore operators in daily reports. Shut-in production information included in these reports is based on the amount of oil and gas the operator expected to produce that day. The shut-in production figures therefore are estimates, which BOEMRE compares to historical production reports to ensure the estimates follow a logical pattern. After the hurricane has passed, facilities will be inspected. Once all standard checks have been completed, production from undamaged facilities will be brought back on line immediately. Facilities sustaining damage may take longer to bring back on line."
In the meantime due to plunging demand, oil tanker rates are plunging. Some carriers are warning of bankruptcy as the costs can't sustain operations. If the world economic situation takes a dip oil prices will continue to slip.
Non-manufacturing data today may be the key number to watch.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at email@example.com.