Energy Markets Commentary - Nov. 16, 2007

Energy futures are trading higher this morning following comments by Venezuela’s oil minister that OPEC does not need to raise output, news that BP may delay the restart of a gasoline production unit at its 470K b/d Texas City, Texas, refinery and a report by the IAEA on Iran yesterday, which gave a mixed account of Tehran’s cooperation with the U.N. on its nuclear program.

Ahead of OPEC’s summit this weekend in Riyadh, the Venezuela oil minister, Ramirez, said today that the producing group does not need to raise output in December and that “OPEC cannot do anything about the price.” The remarks are not surprising since Ramirez said on Oct. 27, according to Reuters, that “We have enough oil in the market, the inventory levels are above average of the last five years.” However, Iran’s oil minister, Nozari, left the door open to a possible OPEC production hike by saying it is too early to say whether OPEC should raise production and that the group will look at the issue at its December meeting. It is worth nothing that the Saudi oil minister, al Naimi, said on Tuesday that OPEC would discuss output at its December meeting, adding that the cartel might increase production then.

Separately, the Venezuelan oil minister said today that OPEC ministers are likely to discuss the possibility of creating a currency basket to price their crude, despite comments by OPEC’s Secretary General on Wednesday that OPEC was not discussing changing the pricing of crude from dollars. Ramirez was quoted by Reuters as saying “Maybe if we priced it in euros we wouldn’t see the situation we’re seeing.” He added that the dollar’s weakness has been a destabilizing factor for the oil market. Correspondingly, Nigeria said today that it wants to diversify its dollar reserves and Angola said it is mulling diversifying $10 billion in its fx reserves.

Also regarding OPEC, Angola said today it will export 1.87M b/d of crude in January, which is 50K b/d less than the 1.92M b/d scheduled for December.

British Petroleum said in a filing that it may delay the restart of a fluid catalytic cracking unit at its 470K b/d Texas City, Texas, refinery until Nov 30.

According to the IAEA’s report on Iran’s nuclear program yesterday, Tehran’s cooperation has been reactive rather than proactive and that the IAEA remained unable to verify Iran was not militarising current enrichment work at secret sites. The report also said that Iran’s has installed 3,000 centrifuges for enriching uranium, enough to begin industrial scale production of nuclear fuel and build a warhead within a year. U.K.’s Guardian Newspaper wrote today that “the installation of 3,000 fully functioning centrifuges at Iran’s enrichment plant at Natanz is a red line drawn by the US across which Washington had said it would not let Iran pass.” Reportedly, a meeting of senior officials of the U.N. Security Council and Germany has been pushed back until later this month, so that the EU’s foreign policy chief could hold 11th hour talks with Iranian officials.

On the weather front, Accuweather wrote today that a chilly day is in store for the entire Eastern Seaboard as heavy snow falls across extreme northern New England and eastern Quebec today. Following the passage of a cold front, chilly air will encompass the entire Eastern Seaboard today. Gusty winds will make the air feel even colder than actual temperature readings.

At 12:15 p.m. EST WTI crude futures are up $0.42 at $93.85. RBOB gasoline futures are up 0.88 cents to 234.50 and heating oil futures are higher by 2.17 cents at 257.67. Natural gas futures are climbing 10 cents to $7.80.

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