Oil watches Algeria as 2012 recorded highest average prices

The Highest Price in History

Well it may not have really felt like it to the Canadian oil producers but according to the International Energy Agency 2012 report, the price of oil averaged $112.00 a barrel, the highest price in history. Of course that was driven mainly by Brent crude that had a whole host of issues such as production problems, hoarding ahead of the implementation of sanctions on Iran and of course your typical take your pick Arab Spring uprising issue.

Yet in Canada the oil sands have been flowing. Weak demand and the inability to get the oil to where it is needed because of the delay of the Keystone pipeline and the Endbridge Northern Gateway project to the Pacific Coast and the process of getting refiners ready to refine that heavy crude, has kept the West Canadian select price at $42.50 according to data compiled by Bloomberg. While this is still a record high price for that oil, it is not high enough for some Canadian producers to start cutting back. Suncor is cutting spending on Alberta oil sands production by a substantial $11.8 billion.

Terror in Algeria! The situation with Islamist militants taking control in Mali could now impact oil. The AFP reports that Islamist militants attacked a plant run by U.K. oil giant BP PLC (BP.LN) in southern Algeria on Wednesday seizing a number of staff as French offensive targeted jihadists in neighboring Mali, diplomats said. "The hostage-taking involved Britons, Norwegians and Japanese," one Western diplomat told AFP, adding that the Algerian army had launched an operation to try to free the captive staff. The militants struck a BP plant in Ain Amenas, 1,150 kilometers (720 miles) southeast of Algiers, the diplomats said. The U.K. Foreign Office confirmed the attack but said it was still seeking details. "There is a terrorist incident ongoing in the town of Ain Amenas at an oil installation near the Algerian border with Libya. The U.K. embassy is aware of the incident and is liaising with local authorities," a spokeswoman said. "We are urgently seeking clarification from oil companies in the area as to whether they have personnel involved in the incident," she added. An Islamist militant who took part in a hostage-taking at a plant run by U.K. oil giant BP PLC (BP.LN) in southern Algeria Wednesday said that the attackers had come from neighboring Mali where France has been striking the jihadists.

This can be very dangerous because an oil plant is like a bomb. We will have to watch this today.

DTN reports that the American Automobile Association expects gasoline prices this year to be lower than in 2012 as a result of increased domestic oil production and less demand. The national average price of gasoline should peak between $3.60 and $3.80 per gallon barring any significant unanticipated events compared to a peak of $3.94 gallon in 2012. 

Today we get the Energy Information Administration supply report. Last night the American Petroleum Institute report showed a build of 46,000 barrels which was much smaller than expected. Gasoline supply showed an increase of 4.1 million barrels and distillates off 568,000 barrels.

While natural gas seems to have broken up into its December trading range from its lower first half of January trading range, the longer term strips seems to suggest that it might be time to be thinking about a long term-bottom. That is not to say that in the short term, in the next year so, that natural gas might not slip below $3.00 or even $2 for a short term, if you are looking two to 20 years out it might be time to start locking in prices. Bids across the time scale seems like players would be thrilled to lock in anything below $4. Maybe time to start looking at far out bullish natural gas strategies.

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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