Deal or No Deal!
Wheeling and dealing dominate the energy market as it desperately seeks direction. Will there be a deal on Greece? Will Europe actually cut a deal to follow through on a deal to embargo Iran's precious oil? And if they do, will it be tough enough?
The AP reports that, "The European Union formally adopted an oil embargo Monday against Iran and a freeze of the assets of the country's central bank as part of sanctions meant to pressure the country to resume talks on its nuclear program. Diplomats said the measures, which were adopted in Brussels by the EU's 27 foreign ministers, include an immediate embargo on new contracts for crude oil and petroleum products, while existing contracts will be allowed to run until July. EU diplomats are calling the measure part of a twin track approach toward Iran: Increase sanctions to discourage what they suspect is Iran’s pursuit of nuclear weapons but to emphasize at the same time the international community's willingness to talk. Iran says its nuclear program is exclusively for peaceful purposes.
British Foreign Secretary William Hague called the embargo part of "an unprecedented set of sanctions."
The news that they actually agreed on sanctions helped rally oil, but will it continue as the market is skeptical that it will impact production?
Natural gas should bounce as it appears we will see a cut back in production. Dow Jones reported that, "Chesapeake Energy Corp. (CHK) said it will reduce drilling activity and curtail production this year in response to low natural gas prices. The second-largest U.S. natural-gas producer after Exxon Mobil Corp. (XOM) has drilled more U.S. gas wells in recent years than any other company, yet it has warned it would cut spending on such wells if prices remained at current low levels. ‘An exceptionally mild winter to date has pressured U.S. natural gas prices to levels below our prior expectations and below levels that are economically attractive for developing dry gas plays in the U.S., shale or otherwise,’said Chief Executive Aubrey K. McClendon. The current glut of natural gas partly stems from the U.S. energy industry's success with new exploration techniques — notably hydraulic fracturing of shale formations, or fracking. Monday, Chesapeake Energy said it will reduce operated dry gas drilling activity to approximately 24 rigs by the second quarter of this year, down by nearly half from 47 dry gas rigs it currently has in use. The company also said it will sharply cut drilling spending, forecasting it will chop dry gas drilling capital expenditures to $900 million in 2012, compared with $3.1 billion last year."
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 firstname.lastname@example.org.