• General Motors Corp. (NYSE: GM) Chief Executive Fritz Henderson yesterday (Thursday) told Bloomberg News that bankruptcy is “probable.” The top U.S. automaker has until June 1 to cut costs and debt or face a government-imposed bankruptcy and asset sale.

• Wal-Mart Stores Inc. (NYSE: WMT) posted a flat quarterly profit – a result of shoppers taking advantage of low prices while the store took hits from a strengthened U.S. dollar, Reuters reported. The retail giant earned 77 cents a share in the first quarter ended April 30, compared to 76 cents a share, the year prior.

• The United Kingdom’s largest phone company, BT Group PLC (NYSE: BT), announced plans to cut 15,000 more jobs and lowered its dividend 58.9% to 6.5 pence a share. The company made those announces as it posted a fourth-quarter loss of 977 million pounds ($1.48 billion) on costs to overhaul its global services division, Bloomberg reported.

• Pittsburgh-based PNC Financial Services Group Inc. (NYSE: PNC) said it plans to sell as much as 15 million shares to raise up to $653 million in capital, Reuters reported. After last week’s bank stress tests, regulators told PNC it needed to raise $600 million to stay afloat should the global economy deteriorate further.

• Chrysler LLC and General Motors Corp. (NYSE: GM) will tell up to 3,000 U.S. dealerships this week they are closing, which could result in another 150,000 job losses, according to the National Automobile Dealers Association. The losses would come on top of the 50,000 people already out of work because of the dealer shutdowns that have taken place so far this year. Chrysler, according to a bankruptcy filing, is exercising its right to reject contracts at 789 dealers — about a quarter of its U.S. retail network. The targeted dealers represent only 14% of Chrysler’s total sales volume, MarketWatch reported.

• Irving Picard, the trustee liquidating Bernard L. Madoff’s investment company, said he expects to approve at least $100 million of investor claims by May 25 and achieve “significant” clawback-suit settlements in the next few weeks, Bloomberg reported. Picard said he has recovered as much as $1 billion of Madoff- related assets and that he has filed lawsuits to recover another $10.1 billion.  Bernard Madoff on March 12 pleaded guilty to running the biggest Ponzi scheme in U.S. history and faces as much as 150 years in prison when he is sentenced June 29 in Manhattan federal court.

• The Paris-based International Energy Agency (IEA) now predicts global oil consumption will fall this year at the fastest rate since 1981. The adviser to 28 industrialized nations on energy policy, said the rise in oil prices to a six-month high above $60 this week was due to sentiment rather than supply and demand fundamentals, with consumption set to fall by 2.56 million barrels per day (bpd) in 2009.

Source: Investment News Briefs Friday, May 15, 2009

In fact, Opec has ALREADY been increasing production – and it has had little effect on the oil price. The oil cartel pumped an average of 32.24 million barrels per day (bpd) of crude in May, an increase of 370,000 barrels from the previous month. This is almost half the proposed new hike for next month. This 370,000-barrel increase in May had little effect on the oil price – and I reckon the latest plan will be just as ineffective as well.

I also believe that the Saudis will be pumping close to their limits after this production hike. They will be able to support any short-term increase in production as its Khursaniya oil field is expected to come fully on stream next month. However, the original plan for that field was to ramp up its production slowly, while using the new stream to allow some of the country’s older fields to rest.

Also, the field was expected to start pumping oil in 2007, but only started producing in 2008 because of technical delays. And even then, it was expected to produce 500,000 barrels per day, but is currently able of producing just 300,000 barrels per day.

So, with the Saudis close to full capacity they may not even manage to increase output by the 200,000 noted by the UN Secretary General. Even if they did – I don’t expect the oil price to fall by much. With world oil consumption currently at around 87m barrels a day, a 200,000-barrel increase represents just a 0.2% increase in production… that’s hardly spectacular, is it?

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Regards,

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Editor Smart Commodities UK

Source: Saudi’s Fail In Bid To Slash Oil Price: Here’s Why It’s Time To Buy Oil

Global consumption is growing almost twice as fast as for oil, it is the cleanest-burning of the fossil fuels, and it is comparatively cheap: it currently trades at about half the cost of crude oil on an energy-equivalent basis.

In an energy-hungry world, it’s therefore not surprising that there’s now a mad scramble to procure long-term supplies and bring them to market.

Let’s take a look at some of the current major developments…

Pipelines. Russia, which has the world’s biggest reserves of natural gas, is building a direct link to Germany beneath the Baltic Sea, and planning others to China and Italy. These are enormous undertakings. The 3,000km Italian link, for example, is expected to cost $15bn.

Elsewhere, the ConocoPhillips-BP pipeline to bring North Slope gas from Alaska to Canada’s oil sands industry and the lower 48 US states will be the largest private-sector construction project in North America. And the pipeline China is building from Turkmenistan in Central Asia to Shanghai will stretch for 9,000 kms.

Liquefaction. An alternative means of moving gas is to liquefy it by freezing, ship the liquids across oceans, then turn it back into gas. The technology is not new, but LNG (Liquified Natural Gas) facilities are hugely expensive. For years this limited its transportation to countries not accessible by pipeline, mainly Japan.

But high energy prices have now made LNG viable on a large scale. And there are other advantages. European nations, for example, nervous about their increasing dependence on Russian gas, are looking to alternative sources such as North Africa, using LNG. China signed a $60bn deal with Qatar last month to buy three million tons of LNG a year over 25 years from 2011.

With its volumes growing 7% a year, LNG is the fastest growing of the fossil-fuel industries. Because of the massive investments required, it is dominated by a handful of very large multinationals.

New Reserves. Oil majors are boosting efforts to find and tap hydrocarbon deposits that are primarily gas, with oil as a side-product.

The newly-discovered Sugar Loaf field under the Atlantic off Brazil, claimed to be one of the world’s biggest, is primarily a natural gas resource. The Shtokman development in the Barents Sea off Russia’s Arctic coast, and several projects off the coast of north-west Australia, focus on production of gas, not oil.

There is also increasing interest in exploiting hard-rock resources that have been neglected in the past because it’s difficult to tap their gas. On the western slopes of the US Rockies, Exxon Mobil is starting to employ an explosive fracturing technique three times more effective than conventional technology to unlock the riches of the Piceance Basin.

Coal-bed Methane. The “fire-damp” found in coal deposits – the curse of miners throughout the ages – is almost pure methane and an excellent substitute for natural gas, which is about three-quarters methane. It may be recovered from worked-out collieries or from coal deposits left unexploited because they are so gassy they are too dangerous to mine, and already accounts for a tenth of natural gas production in the US.

BG Group, the global specialist in the discovery, extraction and supply of natural gas, plans to build the world’s first plant to produce LNG from coal-bed methane piped 400km from fields in the interior of Queensland, Australia.

Liquid fuels. Although currently used as gas to fuel central heating, industrial furnaces and power stations, natural gas can be converted into liquid fuels. In Qatar, which has the world’s third largest gas reserves, they’re building plants to do just that.

Worldwide demand for natural gas has been growing at an average rate of nearly 3% a year, compared to oil’s 1.7%. China’s gas consumption is forecast to triple over the next 12 years, India’s to double. Yet between them they have less than 2% of global reserves, so they will be forced to look to imports from the Mideast, Russia and Australia.

Investing in natural gas: major role in power stations

The strongest demand growth area for natural gas is in electricity generation. Dirk Beeusaert, chief executive of Suez, the world’s biggest operator in the field, says the investment cost per kilowatt of power from gas turbines is “half that of a coal plant, and a third of that from a nuclear plant of the same capacity.”

Gas power stations can be built quickly, are flexible in operation, reduce dependence on other resources such as coal, oil and nuclear – and have particular attractions in these times of ecomania. Not only do they produce less greenhouse gases than other fossil fuel, but they can be used efficiently to generate intermittent power, to fill the gaps when turbines driven by wind and water shut down because of calms or droughts.

A couple of decades ago, gas accounted for little of the world’s electricity generation; now it fuels almost one-fifth.

Although the oil majors are giving increasing attention to finding and producing natural gas, most of the world’s resources are closed to them, or are politically high-risk. Russia seeks to use its gas supplies as a strategic weapon in its dealings with Europe and is squeezing out foreign companies. Iran is a different kind of political minefield. Qatar is happy to partner international oil firms, but is also right in the middle of the potentially explosive Middle East.

One country that is benefiting from all this is Australia, which has reserves almost as large as those of the US, production that is likely to continue expanding for the next quarter-century, and a business-friendly environment. Chevron’s Gorgon project alone, which got its go-ahead from regulators a few months ago, expects to produce more than a trillion cubic metres of gas over its 60-year life.