The countries which make up the Organization of Petroleum Exporting Countries (OPEC Members) are often at odds with each other economically, politically and fundamentally. The members of this very exclusive 12 country club control nearly 78% of the known oil reserves on the planet. This makes this group very powerful and very rich. Russia, Canada and the United States are the only major producers of oil that are not OPEC Members.
OPEC Founding Members
September 1960 was the month in which OPEC was formed with the signing of an agreement in Baghdad, Iraq. The original founding members of the cartel are the Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The acceptance of the OPEC Statute set in motion the objectives that would allow them to coordinate and unify oil prices and policies that allow the member countries to secure fair pricing for their oil, ensure a steady supply of oil to consuming nations and a fair return for the investing industries of each of the OPEC Members.
From the early 1960s until the mid-1980s, OPEC Members attempted to dominate world political decisions based on their control of the largest reserves. However, this strategy backfired somewhat with the determination of World Powers to continue on a road to peace and fair trade for as many countries as possible. In open defiance of Cartel demands the United States was subjected to an open oil embargo that is widely accepted as the reason for the Oil Crisis of the 1970s that led to unprecedented inflation in the United States.
OPEC Members Statute
The adoption of the statute clearly states that when nations, groups or individuals come together they may state their goals as a single unit which may within time be changed as the organization expands. The current statute with some modifications was agreed upon and signed at the second meeting of the Organization of Petroleum Exporting Countries held in Caracas, Venezuela during January of 1961. With 14 amendments added to the Statute since its inception OPEC has changed their vision very little. As a group the members have continued to believe in a single country to be able to maintain sovereignty of their own natural resources.
OPEC continues to maintain their need to control oil prices with a view towards eliminating price fluctuations. However, recent activities over the last two decades have proven that at many times the member countries are more in need of ensuring their own wealth with little regard to world markets, international companies and at times their own people. The single excluding factor to the many countries from participating in OPEC is the single statement “which has a fundamentally similar interest as the Member Countries.” It is this unknown “similar interest” which is confounding to other oil producing entities in the world that allows them to maintain such a choke hold on the overall pricing strategies of oil. Crude oil is not going away and the world must learn to work effectively with the OPEC Members in order to maintain stable economic conditions.
Below are interesting articles found throughout the Commodities Universe.
The EIA released its Natural Gas report with storage coming in at 9 billion cubic feet. Analyst were expecting 20 bcf causing Natural Gas to rally as we head into what many traders expect a cold winter.
We often talk about the energy boom going on across the U.S. , specifically the large natural gas shales that has given the country a century’s worth of natural gas. The large natural gas shales always have the commodity listed as one of the main commodities to replace oil in industries such as the auto industry. And this does not take into account the amount of natural gas that does not make it into the market due to lack of infrastructure in developing areas such as North Dakota where the Bakken Formation has brought a ton of new natural gas supply.
But for commodity traders, it has been a nightmare to invest in. Inventories continue to pile up, winters are warmer than usual and the economic demand is simply not there. I have seen market commentator after market commentator calling it a bottom but the commodity doesn’t quite turn the corner and heads lower and lower. But there might be a couple of things going for natural gas that makes me believe a temporary bottom may be in place. [click to continue…]
Four our international readers, today November 24 is a national holiday here in the U.S. and thus exchanges and business around the country will be closed or have altered hours.
Below is the link to the Thanksgiving Day Trading Schedules
“We are proud of the company’s performance in 2011 and look forward to building on these gains in 2012 and beyond. We have great confidence in the company’s future and our role in helping feed, clothe and shelter the world’s growing population. These developments in our view hold great promise, which should prove rewarding to our investors and other stakeholders in the future.”- Deere CEO & Chairman Samuel R. Allen
Deere (DE) is up more than 3% today despite another market selloff. The Moline, IL farm equipment manufacturer completed a record year with fourth quarter earnings of $670. Net income for the year was also a record year as it achieved full year income of $2.8 billion. [click to continue…]
Source: North Dakota Department of Mineral Resources
In a sign of the times, the EIA recently announced that oil production in North Dakota has quadrupled since 2005. In September 2005, North Dakota produced roughly 1,000 barrels of oil a day. The latest figures (September 2011) indicate North Dakota has quadrupled that nuber to roughly 460,000 barrels of oil a day. Not bad for a state that has a population of less than 700,000. With 100,000 of those residents living in Fargo, North Dakota.
Economy-wise, the oil boom has helped North Dakota fare better than other states in the Union. North Dakota has not had unemployment rate lower than 5% since 1987 or roughly 24 years. And if things keep going the way they are, it might be a while before that streak is broken. The oil boom is also attracting individuals from other states despite the harsh weather conditions. According to March 2011 USA Today article, North Dakota’s population grew about 5% from 2000 to 2010 (the latest census figures).
North Dakota is enjoying an oil boom as large fields such as the Bakken Oil Field, which very well may be the largest oil field in the world if U.S. Geological Studies are proven to be true. Some estimates believe that the Bakken Oil Field has between 271 billion barrels of oil to a high of 503 billion barrels of oil, which would make it the largest oil field in the world. Yet, as the above chart indicates, we are still in the early stages of developing much of the oil. Companies such as Continental Resources cannot drill enough. Its CEO Harold Hamm is wildly bullish on the Bakken field and is betting big. In a recent interview, he states that there might be 24 billion barrels of oil equivalent in the Bakken.
Oil companies are drilling in deeper waters as they seek out new locations to replace depleting wells. Look no further than the Gulf of Mexico where Shell has set a global record by producing oil from a well 9,627 feet below the surface. Not bad eh? At that depth, the well is deeper than 6 Empire State Buildings standing tall.
The Perdido (meaning “lost” in Spanish) drilling and production platform is operating about 200 miles Southwest of Houston and is considered to be the world’s deepest offshore drilling and production platform. While there is no specifics on the platform’s production, Shell has acknowledged that the Perdido platform’s daily capacity is 100,000 barrels of oil and 200 million cubic feet of natural gas. [click to continue…]
United States Commodities Funds, LLC, the manager of the United States Natural Gas Fund (UNG) and the United States Oil Fund (USO), has launched the United States Copper Fund (CPER) which tracks the SummerHaven Copper Index Total Return. The Copper index is comprised of copper futures designed to maximize backwardation and minimize contango.
The United State Copper Fund (CPER) started traded on the NYSE ARCA on November 15, 2011 so its still too early to compare its performance against the iPath Pure BETA ETN (CUPM), which also invests in copper futures. Nevertheless, it will provide another option to investors who want to invest in something that will reflect the price of the industrial metal.
Year to date, Copper is down from $4.50/lb to today’s price of $3.31/lb. as China’s hunger for Copper has started to fade. China’s Central Bank has been raising interest rates to slow down its economy as fears of rapid inflation started swirling. China is the world’s larger Copper consumer as it consumes an estimated 40% of the world’s Copper. Any slowdown in China will have a huge impact on Copper prices.
Unstated States Copper Fund Portfolio
The Copper Index is a single-commodity index designed to be an investment benchmark for copper as an asset class. The Copper Index is composed of copper futures contracts on the COMEX exchange. The Copper Index attempts to maximize backwardation and minimize contango while utilizing contracts in liquid portions of the futures curve. (source)
WTI Crude Oil briefly touched the century mark during the week but ended the week selling off in the final two days. Friday’s selloff meant that Crude was negative for the week. Nevertheless, Crude has rallied almost 30% from the first week of October. What worries investors is the fact that Friday’s selloff is the fact that Friday’s selloff confirms Thursday’s key reversal day and moved below the 10 day moving average. What does this mean? In the short term, Crude will most likely trend lower.
The week’s price action in Crude is a perfect example of how fast commodities can move. It might also be a sign that traders might be taking profits after climbing to $100 from $76 without any hiccups along the way. [click to continue…]
