Commentary by Eric Wilder – Crude oil futures rose more than $2 per barrel today, even though the EIA reports that the U.S. has added more than 5 million barrels of oil to its reserves in the last two weeks.  With no new hurricane in the Gulf of Mexico, what exactly is causing this increase in the price of crude?  The answer is a new type of terrorism.  I call it petro-terrorism. (02–24–2006)

Why sabotage oil infrastructure?  Because it disrupts the world and, ultimately, that is what terrorists are trying to achieve.  http://www.ericwilder.com  http://justeastofeden.blogharbor.com

Commentary by Eric Wilder – This Week In Petroleum, the weekly report of the EIA, has an interesting discussion about a market condition called contango.

Contango, according to TWIP,  is defined as a market in which prices for commodities delivered in future months are increasingly higher than for those delivered in months closer to the present.  When contango occurs, inventory holders can increase their profits by buying now and selling later for a higher price.

Contango, along with other little-known market factors, affect commodity prices and must, along with the weather, and supply and demand, be taken into account by marketers. http://www.ericwilder.com  http://justeastofeden.blogharbor.com

Commentary by Eric Wilder – Violence and threats of violence by Nigerian insurgents have kept the price of crude near $60 per barrel.  Now, the Associated Press is reporting that the Iraqi oil industry suffered $6.25 billion dollars in damage to its infrastructure in 2005 because of sabotage and lost revenues.   Coupled with unpredictable weather, this violence is keeping the price of crude high.  And this is despite the million, or so, extra barrels of oil on the world market being added daily.  http://www.ericwilder.com  http://justeastofeden.blogharbor.com

Commentary by Eric Wilder – What a factor the weather has played the last twelve month concerning natural gas prices.  Hurricane after hurricane struck the Gulf of Mexico, damaging much of the oil and gas producing infrastructure located there.

The first half of December was one of the coldest for that period in Oklahoma history.  The second half of December, all of January and the first two weeks of February were the warmest in history.  The same was true for the rest of the country.

In December, 2005, natural gas in storage was 250 BCFG less than the same period in 2004.  Now, there is 300 BCFG more in storage than there was in January, 2005.  Why, then, is the future’s price of natural gas still above $7 per MCF?  Easy answer: the weather.

New York residents, getting used to short-sleeved shirts, got a reminder of winter this week when all-time record depths of snow fell.  The blizzard extended from the Carolinas to Maine and the message is simple:  don’t mess with Mother Nature.

What’s the real value of natural gas right now?  I don’t know, and neither does anyone else. http://www.ericwilder.com  http://justeastofeden.blogharbor.com  http://ericwilder.blogspot.com  http://ghostofachance.blogspot.com

Commentary by Eric Wilder – An article in Thursday’s Wall Street Journal reported that Mexico’s Cantarell, the second most prolific oil field in the world, is in decline.  The percentage of decline is in question, but the fact that the usually secretive Mexican oil company Pemex admits as much, is significant.

The announcement is helping keep the price of crude above $60 per barrel because oil marketers know the five largest oil fields in the world were all discovered more than two decades ago.  Further, the world is consuming two barrels of oil for every new barrel it discovers.

Mexico is the number two source of oil for the United States, behind Canada, and this announcement comes at an awkward time for the U.S. as it attempts to lessen its energy dependence on the Middle East.  http://www.ericwilder.com  http://justeastofeden.blogharbor.com

  Commentary by Eric Wilder – I just returned from a trip to New Orleans and I am happy to report that the city is on its way to recovery.  When I worked in the Big Easy, many years ago, Shell was a big player in Louisiana.  They also had corporate headquarters in New Orleans at One Shell Plaza.

Shell left New Orleans years ago.  They also sold most of their interests in domestic oil and gas properties and moved mostly offshore or overseas.  The large sign painted on the wall at One Shell Plaza that I saw this past weekend proclaims that they are back in town.

Much of the reason for Shell’s return to the domestic scene is the continued high price of natural gas.  Increased demand and decreasing reserves are fueling the higher prices, but the discovery of a new reservoir is the real driving force behind the major’s return.

The Barnett Shale play in the Fort Worth Basin has demonstrated that there are large quantities of recoverable natural gas in thick shale sequences thought previously to be unproducible.  I remember Ed Smith of Schlumberger telling me more than two decades ago that if we could just find a way to get the oil and gas out of the Woodford Shale that we would have reserves to last us well into the next century.  Well, the next century is here and technology has found a way.

The Barnett Shale play is crowded, with little un-leased acreage available, but there are other plays available.  One such play is in Central Arkansas, and that is where Shell is presently focusing its efforts.  Recently, they announced that they now control more than 70,000 acres in the Fayetteville Shale play in Arkansas.

There are other massive shale plays beginning, the Caney and Woodford plays in Oklahoma, to name a couple.  Yes, Shell is back.  And like Ed Smith’s prediction, it bodes well for both New Orleans and the entire United States.

http://www.ericwilder.com   http://justeastofeden.blogharbor.com