Man! Do we remember how to trade without an imminent crisis hanging over our head? Oh yeah, risk-on baby! The Democrats may be viewed as the winners on this latest showdown but it is the dollar that is the loser. QE is back and here to stay and with the likelihood that this Democratic victory will lead to more government spending, the dollar is quickly falling out of favor. Even the gold market is rebounding as analysts keep getting more bearish, while physical and central bank demand continues to rise. Hot money will flow out of the U.S. driving the bearish gold (COMEX:GCZ13) analysts out of their shorts and away from the so-called nominal cost of production. Gold hit key resistance and pulled back from its huge up move! Stocks popped but are feeling dizzy as earnings are not exactly anything to write home about. As for energy, a heavy overhang of crude supply may keep this market from joining in the inflationary spending party.
Oil prices (NYMEX:CLX13) rallied as it became clear that a deal was going to happen to reopen the government and pay our debts. Yet a report by the American Petroleum Institute dampened some of the buying exuberance. The API reported a 5.9 million barrel build in crude oil supply. Refinery runs only dropped slightly to 86%. Cushing, Okla., the Nymex delivery point, increased by 291,000 barrels, gasoline stocks were in line falling by 2.2 million barrels and distillate fell by 1.3 million barrels.
Natural gas is marking time! The Supreme Court could be holding back the market a bit as it will hear cases on Obama’s EPA regulations surrounding greenhouse gases. Yet the movement toward using more natural gas continues. Reuters reports that “General Motors Co. will begin selling a mid-sized sedan next summer that can be powered by either gasoline or compressed natural gas, the U.S. automaker's chief executive said on Wednesday.
The 2015 Chevrolet Impala, GM's first car powered by natural gas, will feature a powertrain that switches from compressed natural gas to gasoline seamlessly and has a total driving range of up to 500 miles, Dan Akerson said in a speech to be delivered at an energy summit in Washington. The car, which will have one fuel tank for compressed natural gas and a second one for gasoline, will be sold to both retail and fleet customers.
Natural gas is a cleaner-burning, less costly fuel than gasoline, and vehicles powered by compressed natural gas typically emit 20% fewer greenhouse gases than gas-powered cars, GM said, citing the California Air Resources Board. New techniques unlocking vast reserves of natural gas from shale have produced a boom in U.S. supplies and driven down prices, increasing interest in the fuel. The numbers of CNG vehicles remain small. According to the industry group Natural Gas Vehicles for America, about 130,000 to 135,000 natural gas vehicles operate in the United States and more than 16 million globally, most of them commercial and fleet vehicles such as buses and garbage trucks. The number of natural gas filling stations totals about 1,350 in the United States, about half of which are open to the public. That compares with about 168,000 retail gasoline stations, Akerson said.
GM previously said that next year it would begin selling bi-fuel versions of its heavy-duty Chevy Silverado and GMC Sierra pickup trucks and natural gas versions of its Chevy Express and GMC Savana passenger vans.
Honda Motor Co sells a CNG-powered Civic. Ford Motor Co prepares its trucks and vans so that specialty companies can convert them to run on compressed natural gas, including its top-selling F-Series pickup truck, starting next month.
The bi-fuel Impala is meant to address range anxiety associated with vehicles that operate on natural gas only, much like GM's Chevy Volt plug-in hybrid car was designed to do for electric cars, Akerson said. It will carry a factory warranty on the powertrain and fuel system. GM did not disclose how much the bi-fuel Impala will cost, but regular versions start at about $27,700. "Natural gas powertrains are one of the areas where we have increased investment because we believe the technology can satisfy the 'green' needs of both the environment and the stockholders," Akerson said in the speech.
Citing the lack of CNG gas stations, Akerson said the volumes for the bi-fuel Impala will initially be small with most sales to commercial and government fleets. He said selling 750 to 1,000 of the cars in the first model year would be "a home run."
He also repeated his call for the Obama administration and Congress to create a consumer-driven national energy policy. In March, he said President Barack Obama should appoint a commission to develop a 30-year U.S. energy policy framework that includes energy producers, labor groups and energy consumers such as GM. In March, Akerson also said that natural gas as a motor fuel represents a "huge and largely untapped opportunity for commercial fleets and long-haul truckers."
Agreed!!! And it is going to happen! Low prices cure low — prices let the new bull market begin!
Shale gas and oil continues to blow away the peak oil freaks as well as the skeptics! John Kemp at Reuters North Dakota's rapidly rising oil output continues to defy the skeptics, who have predicted that production would stop growing as declining output from existing wells offsets extra production from new drilling. He says that oil production soared to 911,000 barrels per day in August, up more than 200,000 bpd compared with the same month last year, the state's Department of Mineral Resources (DMR) said this week. Production is on course to hit 1 million bpd by the end of the year or early 2014, according to the DMR.
By the end of August, 9,452 wells were in production. But another 450 had been drilled and were waiting fracturing and completion. Completions are running at about 1.5 times the threshold needed to maintain production, the DMR wrote in its monthly statement, which implies output will continue rising in the next few months as crews work through the backlog. Shale skeptics have been confidently predicting since at least 2010, when output was below 300,000 bpd, that production would peak.
Only the DMR has struck a defiant and lonely optimistic note. In 2012 DMR projected output would plateau somewhere between 700,000 and 1.2 million bpd between 2015 and 2025, based on a total of up to 40,000 wells in the thermally mature part of the shale play. Many out-of-state analysts, including leading energy consultancies, criticized those projections as overly positive. Now they appear conservative. So why did the skeptics get it so wrong?
OUTRUNNING THE RED QUEEN
Skeptics based their argument on the unusually rapid output decline from wells bored into shale formations compared with more conventional oil fields. More and more holes would have to be drilled just to offset dwindling production from the existing stock of wells. More wells would require more drilling rigs and fracturing crews, which could not be increased indefinitely. Eventually, production would reach an equilibrium based on some maximum feasible number of drilling rigs and crews. "Yearly output must inevitably decline because the maintenance of a given output each year necessitates the drilling of an increasing number of wells," U.S. government geologist Carl Beal wrote in 1919, during an earlier panic about peaking domestic oil production.
More recently, The Oil Drum blog likened shale production to the Red Queen's Race in Lewis Carroll's book "Through the Looking-Glass". "Here, you see, it takes all the running you can do, to keep in the same place," the Red Queen told Alice. "If you want to get somewhere else, you must run twice as fast."
Shale skeptics pointed to the tremendous variability in output from wells drilled into the most productive core areas of the Bakken compared with the less-prodigious outlying areas. The core would be fully exploited quite quickly, they suggested, leaving only the less productive periphery, necessitating drilling even more wells with lower output.