The week is not even over, but as is often par for the course, the oil world can be counted on to generate so compelling headlines. I have taken the liberty of compiling a few of my favorites that I have seen this week.
Russia Needs $200 Oil?!
Well, we might need to consider the source on this one, but he said it anyway. Mikhail Khodorkovsky, the former CEO of Russia's Yukos Oil and once the country's richest man, said that due to rampant corruption in his country, Russia needs oil prices to soar to $200 a barrel to get to a 10% economic growth rate. Khodorkovsky, who has been in prison since 2003, made the comments to Bloomberg News.
As I have noted in previous commentaries, Russia is not constrained by OPEC quotas because it is not an OPEC member and the country is already the world's largest oil producer. Rest assured Russia will pump away to its heart's content to take advantage of high oil prices and Moscow will shed no tears if oil rises to $200 a barrel.
Along The Same Lines...
Everyone's favorite oil peddlers (insert sarcasm here), the OPEC boys, will collect a third more in oil revenue this year because Brent crude has averaged $111 a barrel, according to the Guardian. Translation: The cartel will have over $1 trillion in revenue for the first time in 2011 thanks to high oil prices. Looks like all that talk of increased production before last week's OPEC meeting was nothing more than bluster.
$30 Billion On Steam?
Several large companies spending $30 billion to explore for oil is one thing and it is not all that much money for big oil when you think about it. Spending $30 billion tapping into steam energy resources underneath Indonesian volcanoes is another ballgame, but companies such as Chevron (CVX), the second-largest U.S. oil company, and General Electric (GE) are doing just that, according to Bloomberg.
Actually, the steam theme makes sense, as least it pertains to Indonesia. This is one of the fastest-growing economies in the world and like many other emerging markets, Indonesia is looking for cleaner-burning energy sources to combat domestic pollution issues.
Look Out Below
NYMEX-traded crude closed below $95 a barrel for the first time since since February on Wednesday, a slide that was aided by the struggles of European finance chiefs to come terms on a second bailout package for Greece. The Energy Select Sector SPDR (XLE) and the Oil Services HOLDRs (OIH) have tumbled 3% and 4%, respectively, in the past five trading days.
No 2008 Sequel
At least that is the opinion of OPEC Secretary General Abdalla Salem El-Badri. El-Badri claims that even with Libya's lost production of 1.4 million barrels per day, the cartel has spare capacity of 4.5 million barrels per day. Of course one has to wonder where that is coming from.
It seems obvious that a quarter of OPEC, Ecuador, Iraq and Libya, could make little or no contribution to that spare capacity, putting the burden squarely on Saudi Arabia's shoulders to lift production. Then again, since OPEC cannot agree to do that so this all may be a moot point.