Getting North American oil into global markets

Flash in the Pan

China’s Flash PMI was not as bad as feared but Europe’s PMI came in short of expectations. The HSBC flash China manufacturing purchasing managers index rose to a five-month high in July at 49.5, raising hopes that perhaps China could somehow reverse its manufacturing slump. Yet In Europe, with downgrades galore, it is really hard to see how the demand for Chinese products will continue to stay strong, the increase in the output sub-index and signs of an improvement in new export orders seemed to suggest that China’s manufacturing is on the rise. Yet in Europe we saw manufacturing come in below expectations at 46.4 and it seems that China’s Flash PMI will be just a flash in the pan.

Of course China is looking beyond the present as it looks to hold more sway over the global energy markets with CNNOC’s purchase of Canada’s Nexen, a major player in the North Sea and a firm that has a lot of sway over the pricing of Brent. In fact, according to Dow Jones, many analysts fear that China’s control of the all important Buzzard oil field in the North Sea will give them an advantage in knowing about production problems, allowing them to secure supply at what could amount to a discount. They also could influence global oil prices by raising and lowering production like OPEC does.

Others suggest that China’s influence in Canada could actually start to remove the North American oil glut and help bring about an accelerated construction of a pipeline running to the Pacific coast from oil-sand reserves in Alberta in the long-term. Dow Jones quotes Carsten Fritsch, energy analyst at Commerzbank who thinks that, "This would remove the oversupply on the North American market, which is responsible for WTI's current price discount as compared to Brent."

The truth is that China or no China, market forces are working towards finding ways to get North American oil in the global oil markets.

And what is more there may be even more North American oil in the near future. The Wall Street Journal reports that, “Ten years ago, new oil field technologies unlocked vast crude supplies from western Canada's oil-sands deposits, propelling America's northern neighbor to the top echelon of the world's petroleum repositories. Now oil companies here are experimenting with technologies that could unlock even more reserves from what is some of the world's heaviest and stickiest petroleum. The new technologies could also drive down the cost of producing oil in Canada. One consortium aims to get oil flowing to the surface by sending radio waves from huge antennae pushed through wells deep underground—adopting technology first developed for the U.S. government to eavesdrop on underground bunkers….” A must read in the Journal!

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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